quality of infrastructure data for SSA countries. However, these are the very same data that are extensively used in the literature and thus we rely on the same imperfect figures.

# **4. Results**<sup>**12**</sup>

In this section, we discuss the determinants of growth in WAEMU countries over 2011-2016. The analysis focuses on 2011-2016 because this period corresponds to WAEMU’s growth acceleration episode. Results for 2000-10 are also presented in tables and graphs for comparison (See Annex Figures 8 and 9). The period before 2000 was not included in the analysis as data were incomplete for some countries and variables. Figures 2-7 show the predicted growth contributions of the determinants based on the parameter values shown in Table 1 and the observed changes in the variables between the respective data points.

Growth in WAEMU during 2011-2016 was mainly driven by improvements in structural factors. Structural factors contributed about 1.5 ppts of the average annual per capita growth rate of 2.5 percent, i.e. about two-thirds of predicted growth (Figure 2). This reflects the considerable progress WAEMU countries have made in financial deepening, infrastructure development, and trade openness. Structural improvements in WAEMU exceeded the SSA average. A stable macroeconomic framework also supported growth while external factors were unimportant.

Financial deepening and infrastructure were the main structural determinants of growth. Increased private sector credit and infrastructure contributed roughly 0.7 ppts and 0.4 ppts respectively, together accounting for three-quarters of growth due to structural factors. The largest increases in private sector credit (in percent of GDP) were registered by Togo (by about 19 ppts between 200010 and 2011-16), Senegal (12 ppts), and Burkina Faso (10 ppts). Several countries experienced a substantial increase in private investment (percent of GDP), with cumulative gains ranging from 2- 4 ppts in 4 of the 8 countries to 11 ppts in Niger. As infrastructure coverage in WAEMU countries is low, the growth effect of narrowing the infrastructure gap is potentially large. Public investment also increased in most countries, with the cumulative gain ranging from about 2 ppts in 4 countries (between 2000-10 and 2011-16) to 6 ppts in Togo.

Growth was driven by domestic rather than external factors. External developments slightly reduced growth in the region, although this masks variations across member countries. The findings are consistent with the fact that WAEMU countries, unlike oil-exporting SSA economies, were much less affected by falling commodity prices. In the context of low energy prices, a few countries (including Côte d’Ivoire and Guinea-Bissau) gathered some growth momentum, albeit modest. By contrast, headwinds from lower commodity prices somewhat held back growth in relatively more resource-intensive countries (Benin, Burkina Faso, and Mali).

The monetary union has provided a stable macroeconomic framework for the growth process, although the observed (direct) effect on growth is marginal. Macroeconomic stability provides a conducive environment for sustained growth by, among others, helping countries anchor expectations and fostering long-term investment decisions (Berg _et al_ ., 2012; Arizala _et al._ , 2017). WAEMU’s robust growth in recent years coincided with relatively sound macroeconomic management. Member countries have achieved stronger outcomes than other SSA regions, with inflation remaining low at 0.8 percent, the real effective exchange rate in line with fundamentals, and external balance more or less stable (IMF, 2018). Recently adopted WAEMU convergence criteria have helped anchor fiscal policy to reduce fiscal excesses and foster financial stability. Studies show that the monetary union has positively contributed to price stability and fiscal outcomes

> 12The following weights based on real GDP (in PPP terms) were used to compute aggregate estimates for the WAEMU: Côte d’Ivoire (33.6 percent), Senegal (16 percent), Mali (15 percent), Burkina Faso (12.9 percent), Benin (9.4 percent); Niger (8 percent), Togo (4.5 percent) and Guinea-Bissau (1.5 percent).

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