Economic situation Trade hub in the Gulf of Guinea
The well-developed deepwater port of Lomé, the capital, serves as a transshipment point for the movement of goods to the Sahel countries and North Africa. The country has also expanded its international airport and improved numerous highways.
Private investment needed
However, the high levels of spending on infrastructure development have led to financial constraints in Togo. According to the International Monetary Fund (IMF), two thirds of all government revenue had to be used to service public debt in 2019. In an agreement with the IMF, the government made a commitment in 2017 to drastically reduce public spending. It is thus trying to improve the environment for private investment.
The World Bank's 2020 Doing Business Report (External link), which assesses the business climate in 190 countries, ranks Togo one of the world's top ten reformers. Compared to the previous year, it moved up 40 places. It has now reached position 97. The Report praises, in particular, the progress made on the following aspects: starting a business, registering property, and getting credit. However, potential investors are often deterred by political tensions, legal uncertainty and corruption.
COVID-19 pandemic has caused economic downturn
Economic growth in Togo has been four to six per cent over the last few years. Due to the COVID-19 pandemic, the growth rate in 2020 was only 0.7 per cent. Restrictions imposed in order to contain the pandemic have meant that farmers have been unable to plant, businesses and markets were closed, and sales turnover has declined dramatically. Between May and June 2020 alone, sales dropped by an estimated 51 per cent compared to the previous month. These impacts are hitting the many small and medium-sized enterprises particularly hard. Their sales have in some cases dropped by 75 to 100 per cent compared to pre-crisis levels. The IMF is expecting that the economy will begin to recover in the course of 2021.
Value chain development on the ground
The country's only significant extractive resource is phosphate, of which it has the world's fourth largest reserves. There is great international demand for phosphate, which is needed for the production of agricultural mineral fertiliser.
So far, the country has mainly been exporting unprocessed raw materials, which is making it vulnerable to price volatility in world markets. The government is working to foster local processing and is developing agricultural value chains with high employment and export potential. At present, most farmers are engaged in subsistence farming.