Economic activity declines: a drop in GDP of 1.6% in the 3rd quarter

• Caused by the slowdown in extractive activities

• Good performance of public administrations

AIn the third quarter of 2022, national economic activity fell by 1.6% compared to the previous quarter. This decline in the level of activity is mainly due to the significant decline in extractive activities which negatively impacted several other sectors of the economy. This is what emerges from the quarterly national accounts, published by the INSD, in December 2022.

The production of these national accounts, undertaken since 2013, provides the country with indicators on the country’s Gross Domestic Product (GDP), which helps to monitor the dynamics of the economy. A vision that makes it possible to identify the inflection points of a State’s growth. And for the 3^e quarter of the year, the main inflection point of the Burkinabè economy was observed in the secondary sector, particularly in mining, but also in market services.

14% drop in extractive activities

GDP fell by 1.6% in the third quarter of 2022, compared to the previous quarter. This poor performance is the result of the sharp drop in the secondary sector and market services. The decline was contained thanks to strong growth in non-market public administration services and timid growth in the primary sector.
Source: INSD

After a drop of 10.3% in the first quarter, then a slight increase of 2.9% in the second quarter, extractive activities fell sharply by 14.4% in the third quarter. This drop “results from the considerable drop in the quantities of gold produced, dropping from 15.4 to 13.2 tonnes. It is linked to the closure of several mining sites during the year, due to insecurity”, specifies the INSD report.

In this lot, we can mention the Ouaré mine, which was attacked on January 30, 2022. Following the Ouaré attack, Avesoro decided to suspend the activities of the 3 mining permits.

There is also Nordgold, which suspended the operation of its Taparko/Bouroum mine in April 2022. A suspension that Nordgold justifies by the terrorist incursions on the site and the problems of access to the site. And finally, the Riverstone Karma mine, which was attacked on June 9, 2022. Two people were killed in the attack, as a result mine officials suspended operations. As of October 21, 2022, out of 17 mines, the country has increased to 8 mines in operation. Added to this is the closure of the Perkoa Zinc mine, following the flooding of April 16, 2022.

Following extractive activities, those relating to transport and storage also fell by 12%. This decrease is partly explained by weak demand for transportation services by a mining sector marked by increasingly difficult and restricted operating conditions.

Energy was also impacted by the fall in extractive activity. Indeed, the added value of electricity, water and sanitation experienced a decline of 19.6%.

“This decline is explained by a drop in electricity production excluding the margin on imports (-51.9%); situation attributable to the low demand for electricity by industries, in particular, extractive activities,” the document reads.

Increase in the value added of public administrations

Despite a sluggish situation in the economy as a whole, the 3^e quarter of the year was marked by the increase in the value added of general government. This increased by 10.4%, according to the report published by the INSD. This is the second major change observed in the national accounts.

The document states that the performance of public administrations “is explained by the increase in additional staff and the career advancements of agents. It can also be explained by better execution of the State budget as a whole”.

Note, however, that while the national accounts provide a complete view of economic activity, they come out with an inevitable lag (90 days). This delay is due, according to the INSD, to the fact that it is necessary to exploit all the statistical information of all the economic actors, which is produced with different deadlines. This information includes the accounts of all companies, the State, NGOs, associations and the estimate of the informal sector. The INSD already produces a certain number of short-term indicators which make it possible to analyze economic activity on a quarterly basis, but none of these indicators can give the overall evolution of the national economy. The national accounts therefore make it possible to respond to this problem.

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Manufacturing of mineral products and construction down

Lhe manufacture of mineral products fell sharply by 21.3% in the third quarter. This poor performance follows the timid growth already recorded in the second quarter. The decline in the added value of mineral products is linked to the decline in the quantities of cement produced. This situation is explained by weak demand from construction companies, whose added value fell by 4.6% in the third quarter.

It should be noted that construction works have fallen sharply over the last three quarters, compared to the level of activity in 2021. This is partly due to the slowdown in public construction works, which have fallen since the change of regime at the start of ‘year.o