South Sudan Economic Outlook

Economic performance and prospects

South Sudan is the most oil-dependent country in the world; oil accounts for the bulk of its exports, approximately 60% of GDP and more than 95% of government revenues. Economic performance has been hindered by current global headwinds and the country’s fragility challenges. The combination of the sharp drop in oil prices (from $110 per barrel in 2014 to roughly $50 in 2017) and the reduction in oil production following the outbreak of the ongoing civil war sharply reduced the growth rate. Real GDP contracted 5.3% in 2015 and 13.1% in 2016, and it is projected to decline 6.1% in 2017.

Macroeconomic evolution

Falling oil prices and low oil production since 2013 have halved fiscal revenue as a percentage of GDP, resulting in a substantial drop in foreign reserves and acceleration in consumer inflation. The budget deficit in 2016 was 25.2% of GDP; if again financed by Central Bank borrowing or accumulation of arrears, the deficit will continue to fuel domestic currency depreciation and high inflation. Government gross debts increased from zero in 2011  to an estimated 15.5% of GDP in 2017. Since the South Sudan pound (SSP) was liberalized in December 2014, its exchange rate against the U.S. dollar depreciated from SSP 2.95 to more than SSP 170 as of October 2017. High youth unemployment and underemployment are problematic; more than 50% of young people are underemployed, and only 12% of the workforce is in formal employment.

Tailwinds

In August 2015, parties to the civil conflict signed a peace agreement, led by the Intergovernmental Authority on Development. Implementation will put the country on the path to economic recovery and development. The abundant natural resources include fertile agricultural land that is potentially irrigable, aquatic and forest resources, and mineral resources. These resources have the potential to drive the sustainable economic development agenda. Although 70% of the land is suitable for agriculture, only about 4.5% is cultivated. Lack of investment in high-yielding farming technology and inputs are the main constraints to increasing agricultural productivity. In light of its landlocked situation, the government has engaged in regional integration by joining most regional organizations. Membership in the organizations is likely to facilitate recovery, and benefits can develop quickly once stability is restored. The recovery in oil prices will provide additional fiscal resources to ease budget constraints, provided institutional and human capacity in public financial management is built.

Headwinds

Economic prospects remain bleak due to the unresolved political, social, and economic fragilities and continuing global headwinds. The civil conflict has resulted in serious humanitarian and social crises and diverted resources from development needs. As of September 2017, about 2 million people remained internally displaced; more than 1.8 million fled to neighboring countries; and 213,000 sought UN shelter. An estimated 6 million people faced severe food insecurity. Given the country’s over-dependence on crude oil exports, slight changes in oil production, prices, and demand can quickly translate into massive economic shocks. The prolonged civil war left the country with an extremely poor and underdeveloped infrastructure and limited human capital critical for promoting sustainable economic growth and development. The country has one of the most constrained business and investment climates in the world, according to the ranking on the World Bank’s 2018 Doing Business report.

You are currently offline. Some pages or content may fail to load.