São Tomé & Príncipe Economic Outlook

Economic performance and outlook

The economy saw growth above 4% in 2010–15, driven mainly by foreign direct investment (FDI) in agriculture and construction. The economy grew an estimated 5.2% in 2017, boosted by services and construction. The short-term economic outlook is positive; GDP growth is projected at 5.5% in 2018 and 5.8% in 2019, fueled by investment in infrastructure. Services are expected to be the main contributor to aggregate output in 2017, accounting for an estimated 60% of GDP, followed by industry (20% of GDP), and agriculture (10% of GDP).

Macroeconomic evolution

The economic framework is anchored in a three-year (2015–18) Extended Credit Facility (ECF) agreement with the International Monetary Fund. On the fiscal side, the government has undertaken reforms—a tax on service delivery for nonresidents and a value added tax to be introduced by 2019—to sustain fiscal consolidation and reduce debt. Current expenditure continued to dominate government spending, despite a 2% decline in 2017 (mainly wages and salaries), while tax revenue remained subdued. The budget deficit is projected to increase from 1.7% of GDP in 2016 to 2.1% in 2017 to 2.9% in 2018 but is projected to decline to 2.6% in 2019. Inflation declined to an estimated 5.1% in 2017, from 5.5% 2016, as a result of lower food prices, and is projected to further decline to 5% in 2018 and 4.6% in 2019, supported by the peg of the dobra to the euro since 2010. The current account balance deficit (including transfers) is expected to reach 10.2% of GDP in 2017, up from 5.8% in 2016.


The government implemented reforms to improve public financial management, revenue collection, the economic regulatory environment for business, and the banking system. Reforms include the judiciary system (creation of data centre for registry and public notary; agriculture (preparation of irrigation strategy); education (construction of new classrooms); and the business environment, which ranked 169 in the World Bank’s 2018 Doing Business report, down from 162 in 2017. The government also adopted a National Employment Policy in 2016 and implemented an automatic fuel price adjustment mechanism to ensure full cost recovery and prevent debt accumulation. The country achieved tangible results in governance (scoring 60.5 out of 100 on the 2015 Mo-Ibrahim Index) and the eradication of malaria (three-time winner of the African Leader Alliance for Malaria). Energy production and access are expected to improve in the coming years, with investments pledged by the African Development Bank, the European Investment Bank, and the World Bank.


High public debt and lower revenue collection, coupled with a narrow export base, remain key challenges to inclusive growth. Poor economic infrastructure—including transport, roads, water, and energy—is a major constraint to inclusive development. The risk of debt distress is high, with public debt (including arrears) projected to reach 97.2% of GDP in 2017 (despite having benefitted from debt relief under the Highly Indebted Poor Countries Initiative in 2007). Key risks are also linked to the legislative elections scheduled for 2018, particularly the high risk of extra-budgetary spending and political instability, along with the increasing level of nonperforming loans in the financial sector. The dependence on primary commodity exports and imports of food and fuel makes the country extremely vulnerable to external shocks.