Guinea-Bissau Economic Outlook
- Despite 4.8% growth estimated for 2015, and 5.7% projected for 2016 and 6.2% for 2017, the outlook remains fragile because the economy is highly dependent on the social and political climate, the performance of the cashew-nut subsector and on continuation of reforms.
- There has been significant progress in reforms thanks to better consideration of the country’s development priorities, but the state’s capacity to continue and reinforce its management of public finances will be critical for recovery in the medium term.
- The city of Bissau is the country’s main economic magnet, but for inclusive growth, public policies must energise secondary towns as well as work for the economic and social development of rural areas.
Guinea-Bissau’s return to constitutional order in 2014 allowed the country to improve its socio-economic situation and return to growth. After three years of stagnation due to the 2012 coup, Guinea-Bissau’s economy has returned to significant growth – estimated at 4.8% in 2015, up from only 0.8% in 2013 and 2.7% in 2014. The growth is because of a good year of cashew-nut sales and a sharp increase in subsistence food crops, as well as the private sector’s increased confidence, public-sector reforms (budgetary consolidation in particular) having been resumed and the return of donors, as illustrated by the success of the partners’ round table held in Brussels in March 2015. There was also some political mayhem in 2015, which could jeopardise the projected growth and the viability of reforms. The major challenges to growth in the short term are the political situation and climate hazards that could affect the primary sector. Assuming that political tensions are resolved, rainfall is similar to 2015 and reforms are continued, growth is projected at 5.7% in 2016 and 6.2% in 2017.
Compared to previous years, 2015 was marked by a considerable rise in revenues and expenditure. During the transition period, the country’s management of public finances had taken a turn for the worse. During 2015, the authorities were able to improve tax management and administration by setting up treasury committees and bolstering customs-related posts and functions. Even though much remains to be done to secure and develop the progress made since the end of the transition period, these improvements have allowed the state to function better (wages paid on time, auditing of wage arrears, etc.). Thus, the tax burden rose from 8.7% in 2014 to 10.5% in 2015, while the overall balance stood at -2.2% of gross domestic product (GDP) and the primary balance at -1.6%. Measured by the Harmonised Index of Consumer Prices, inflation has been estimated at 1.5% in 2015 in a context of demand recovery.
Compared to 2014, there was very little improvement in the social situation and in human development. Although the consolidation of public finances and support from the country’s technical and financial partners improved education and health coverage, the overall situation remains disturbing. The country holds one of the lowest ranks in the Human Development Index, and data from the latest multiple-indicator cluster survey (MICS IV) has highlighted major human-development deficiencies, particularly in relation to women and the rural populations.