In all economies, production can be divided into two parts: what is sold on the market and what is allocated by the state. The part of output that is sold on the market is referred to as market output and that which is subject to state appropriation is non-market output. The non-market sector includes public services (government) which are valued on the basis of their cost, essentially wages paid. The market economy, on the other hand, includes market goods and services. The distinction between the market and non-market sectors therefore leads to a dissociation between market and non-market GDP.

In Benin, the non-market sector is growing much faster than the market sector. In other words, non-market value added is growing at a higher rate than market value added. (Figure 1).

Figure 1: Evolution of market GDP vs non-market GDP in Benin. Year 2008 = 100. BCEAO data

There is also another way of looking at the highlighted phenomenon. From 2000 to 2005, the weight of the state in relation to the private sector fell. Since 2005, the growth of the Beninese economy has been driven by the growth of the public sector (Figure 2). Without discussing the efficiency of public spending, it should be remembered that the financial resources of the non-market sector come directly (via taxes) or indirectly (via the debt, which is only future taxes) from the market sector. Therefore, if the non-market sector grows faster than the market sector, there is bankruptcy on the horizon.

Figure 2: Ratio of non-market GDP to market GDP in Benin. Year 2008 = 100. BCEAO data 

Benin's drift towards a non-market mode of production poses financing problems and increases the stock of public debt. Indeed, in Benin, structural growth (GDP per capita growth) evolves in almost the same way as the stock of public debt (Figure 3). This leads to the following remark: in the case of Benin, GDP growth should not be confused with growth in market value added.

Figure 3: Evolution of public debt stock vs. per capita GDP growth in Benin. Data BCEAO, World Bank

Posted by : Pôle Economie     -     Posted on : Jun 3, 2021