BURKINA FASO- A FLEDGLING WAEMU CONSUMER MARKET.

Of the West African Economic and Monetary Union (WAEMU) nations (Benin, Burkina Faso, Cote d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) Burkina Faso is likely to experience the greatest economic expansion in 2002 and 2003. This, in turn, will lead to a gradual improvement in consumer power. One of the world's poorest nations, Burkina Faso

has a marginal consumer base, but an increasing percentage of the citizenry is participating in the emergent consumer economy.

In spite of the impressive headway made on the macroeconomic front, Burkina Faso still faces many major hurdles on the road to development. Roughly 90 percent of the population makes a living from the land, and the advance of desertification threatens agricultural activity. Rural education in the field of land conservation is urgently needed in order to avoid further environmental degradation.

Industrial development is seriously limited by the nation's weak transportation and communications infrastructure. Public spending on infrastructure projects will increase over the next few years, driving up the demand for associated goods and services, most of which will come from abroad.

A recent IMF economic report on the WAEMU reveals that Burkina Faso is the member nation with the greatest potential for GDP expansion over the next few years. During 2002 and 2003 the benefits of economic expansion will trickle down to the citizenry in and around the capital. This, in turn, will increase demand for basic consumer goods and a few discretionary products. GDP growth also bodes well for expanding Burkina Faso's trade with regional partners.

Burkina Faso's economy expanded approximately 6.3 percent during 2001 and the IMF reported an inflation rate of 2.9 percent that year. That represents a very great improvement over the inflation rate of 24.7 percent registered in 1994. Recent levels of modest inflation come on the heels of two years of deflation amounting to 1.1 and 0.2 percent in 1999 and 2000 respectively.

Favorable macroeconomic performance during 2002 will begin to pay off in terms of increased private sector consumption of goods and services. However, household consumption will expand at a faster pace than industrial consumption. The gradual evolution of a viable consumer market should pave the way for increased foreign investment in local industry by the middle of this decade.

One development strategy the government has successfully used in recent years is to stimulate domestic investment. At present, about 27 percent of Burkina Faso's gross national product is invested in national development projects. A similar percentage has been invested since 1996, but the fruits of that investment are only beginning to emerge. Formal employment is gradually increasing as much-needed infrastructure projects progress.

INCREASED INTRA-REGIONAL CONSUMPTION ON THE HORIZON

Burkina Faso's purchasing power parity (PPP) per capita of US$250 is very low compared with an average of US$349 for WAEMU member nations and roughly US$32,000 for the United States. Nevertheless, the ingredients are in place for gradually improving the living standards of the citizenry. That will ultimately lead to increased sales of non-durable goods during 2002. Burkina Faso's population is approaching the 11 million mark, and is among the fastest growing in the world. It is the second most populous nation in the WAEMU, which is home to a total of 66.6 million people.

The weakness of the consumer base is reflected in the fact that the value of growth imports is less than US$1 billion per annum, whereas WAEMU's total imports are valued at US$6.7 billion per annum. Burkina Faso's intra-regional imports represent only a 4.4 percent of the WAEMU total, while its exports account for 28.1 percent Union's total. Increased intra-regional commerce over the next couple of years should allow WAEMU nations to gradually reduce their dependence on imports from outside the Union. However, intra-Union trade will never live up to its potential until the volume of finished consumer goods produced in the region increases.

According to the IMF, deterioration in intra-Union trade, inappropriate trade policies, and political conflicts led to a generalized slowdown in the economic expansion of the WAEMU region. The IMF report states, "This slowdown could extend beyond 2001 on account of the weaker growth prospects in the international economy, unless efforts are made to strengthen macroeconomic policies and deepen structural reforms in WAEMU countries."

The process of intra-regional trade integration gained momentum in 2000 with implementation of the customs union, and the Convergence, Stability, Growth, and Solidarity Pact (adopted in 1999). These developments laid the groundwork for increased trade, although real momentum will not be achieved until member nations adjust their production to regional needs, rather than focusing on meeting the demand of distant markets for basic commodities.

According to the IMF, trade authorities of the WAEMU nations have progressed in their discussions aimed at implementing common trade policies and creating regional infrastructures. Nevertheless their efforts are hindered by slow implementation and insufficient funds to make urgently needed improvements in basic infrastructure. Structural rigidities and other distortions in the WAEMU economies contributed to the economic slowdown experienced during the latter half of 2001.

WAEMU member nations have progressed at differing paces in recent months to complete the first phase (convergence) of their economic pact. Only one nation-Senegal-has met six of the nine criteria considered essential for the pact to be successful. Three countries, Burkina-Faso, Benin and Mali, have met five of those criteria; while Guinea-Bissau has met two criteria; and Cote d'Ivoire, Niger, and Togo have met only one. The criteria include achieving a fiscal balance, while bringing foreign debt, inflation, and internal debt under control. Others call for responsible investing as well as timely payment of domestic and external debt.

POLITICAL PROBLEMS AFFECT COTE D'IVOIRE'S ECONOMIC POTENTIAL Political turmoil in the most populous nation in the WAEMU economic region, Cote d'Ivoire, has limited its ability to work toward WAEMU integration. With a population of about 14.5 million people and a PPP of US$700, Cote d'Ivoire has the potential to become a leading regional consumer base.

Cote d'Ivoire has made little headway in stimulating the consumption of goods and services over the past two years and little progress is likely in 2002. Political problems led to negative economic growth in 2000 and 2001 of -2.3 and -1.0 percent respectively. Its inflation of roughly 4.0 percent in 2001 is the highest in the region.

Nevertheless, Cote d'Ivoire's inflation is still under control and is not high enough to undermine trade within the framework of the WAEMU. It has the largest gross national product of the region, valued at about US$10.2 billion. That is high considering that total GNP of WAEMU member nations is US$26.1 million.