São Tomé & Príncipe Economic Outlook

• Growth in 2011 was moderate and is expected to remain so in the mid-term.
• The continuing and future reforms will continue to be focused on improving public financial management, banking supervision and labour regulations.
• Difficulties in integrating the young into the labour market are compounded by the absence of a youth employment policy.

São Tomé and Príncipe is a fragile state, vulnerable to external shocks and highly dependent on agriculture and overseas development assistance (ODA). The service sector has so far been the dominant factor driving economic growth, accounting for about 48.6% in 2011 and employing nearly 60% of the workforce. Overall economic growth was driven mainly by the construction, consumer, retail, tourism and mining sectors. The government has made significant progress in reforming public finance management.

However, despite tight fiscal policy, the overall budget deficit is expected to remain high in 2012 and 2013. The strict monetary policy also helped the authorities to preserve their minimum threshold of international reserves at the level required by an agreement signed with Portugal. Over the medium to long term, São Tomé and Príncipe should take advantage of a number of opportunities within the region to attain sustainable economic development. These include capitalising on the benefits of its proximity to some African countries and removing the constraints of non-trade barriers that hinder effective integration in the region. The free and transparent presidential election held in July/August 2011 demonstrated the country’s commitment to peace and stability.

The integration of the young into the labour market has been challenged by the absence of a youth employment policy. The government’s inability to generate employment makes young people the most vulnerable section of the population, which in turn may be a challenge to political stability and economic prosperity.