Ekonomske analize
Sao Tome and Principe

Sao Tome and Principe

Population 0.2 million
GDP 1,943 US$
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major macro economic indicators


  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 3.9 2.7 2.9 3.0
Inflation (yearly average, %) 7.7 9.0 7.9 7.4
Budget balance * (% GDP) -2.8 -4.7 -2.6 -2.5
Current account balance ** (% GDP) -8.2 -7.3 -7.6 -8.0
Public debt (% GDP) 92.4 95.0 94.5 93.6

(e): Estimate. (f): Forecast. *Excluding oil revenue, grants and associated expenditure. **Including official transfers.


  • Prospects for expansion of the tourism sector
  • Support from international donors
  • Strong ties to Portugal and Portuguese-speaking countries (Angola, Brazil)
  • Dobra pegged to the euro


  • Heavily dependent on international public aid
  • Economy still dominated by agriculture and fishing
  • Poor business climate
  • High export and import costs due to remote island location
  • Underdeveloped and weak banking sector
  • High level of public debt


Growth dependent on external financing

After two years of poor economic performances, growth will be moderate in 2020. Energy supply issues, which are particularly damaging to activity, are likely to persist despite the government's efforts (purchase of new thermal generators, development of photovoltaic and hydroelectric production). Growth will remain dependent on external financing, which mainly takes the form of public investment (10% of GDP). Efforts to build and upgrade roads and restore the electricity grid are expected to continue, while work to expand the international airport will start in 2020, driven by Chinese financing. These infrastructure projects are aimed notably at supporting growth in the tourism sector, which will continue to expand. However, the sector will be hurt by the weak local banking sector, notwithstanding the moderate recovery in credit growth in 2019. Investments will also be supported by the resumption of offshore oil exploration, notably by Total, in the development area shared with Nigeria. Agriculture and, to a lesser extent, fisheries will contribute to growth. Cocoa exports may be more buoyant thanks to a gradual increase in world prices, with Ghana and Côte d'Ivoire (60% of world production) looking to work together to limit their output. Solid performances by the agriculture and tourism sectors should boost household consumption, but the fiscal consolidation advocated by the IMF, coupled with high inflation due to energy prices on the archipelago, will have an adverse impact.


Structural twin deficits and debt under supervision

In 2020, the overall government deficit should decrease slightly as the domestic primary deficit, which excludes interest on debt, oil revenue as well as grants, subsidies and associated expenditure, continues to decline, in line with the fiscal consolidation advocated by the IMF under the new Extended Credit Facility arrangement granted in October 2019 and worth USD 18 million over 40 months. The IMF expects the country to control its spending, including by scaling back subsidies on fuel prices, and to increase its income, notably by introducing VAT. Implementation of the new tax, scheduled for January 2021, should make it possible to raise more domestic resources. These resources, which remain low, constrain the country’s fiscal policy, which already has to contend with volatile external financing. Despite the work being done to reverse the debt trajectory, the risk associated with debt sustainability remains very high. Notwithstanding restructuring negotiations, the country remains in arrears with some bilateral creditors, namely Brazil, Angola and Equatorial Guinea, as well as with domestic creditors. For instance, through the national water and electricity utility company, the country is heavily indebted to ENCO, a company that provides oil to the archipelago and that belongs to an Angolan state-owned company.


The country’s island location and limited economic diversification will continue to fuel the trade deficit (30% of GDP) and, consequently, the current account deficit (excluding grants), which is likely to widen slightly in 2020. The rise in imports, particularly of capital goods required for infrastructure projects, will only be partially offset by higher exports of goods, mainly cocoa, and services linked to tourism revenues. In addition, expatriate remittances could decline, particularly with the euro zone slowdown. Deficit financing will again rely chiefly on external grants, but also on FDI (mainly related to oil exploration) and concessional loans. The country's vulnerability to volatile external grants exposes the foreign exchange reserves (equivalent to only 3 months of imports in July 2019) on which the sustainability of the dobra's peg to the euro depends.


A coalition tested by reforms

Since the October 2018 parliamentary elections, the coalition formed by the Movement for the Liberation of São Tomé and Principe – Social Democratic Party (MLSTP-PSD) and several smaller parties (PCD-UDDD-MDFM) has been in power, despite the relative majority (25 seats out of 55) of the Independent Democratic Action (IDA) party, which previously held the absolute majority. At the helm of the coalition, Jorge Bom Jesus succeeded Patrice Trovoada (IDA) as Prime Minister, leading to a power-sharing arrangement with President Evaristo Carvalho, elected in 2016 and a member of the IDA. Implementation of the IMF's recommended fiscal reforms, which are potential sources of popular opposition, could test the stability of a coalition with the narrowest possible majority (28 seats).


The country’s lack of infrastructure and weak legal and regulatory environment are a constraint on the business environment, which came 170th out of 190 countries in the Doing Business ranking.


External cooperation will remain crucial for the archipelago. Relations with Portuguese-speaking countries, including Portugal, Angola and Brazil, are still very important. Since recognizing the One China policy at Taiwan's expense in 2016, São Tomé and Principe has improved relations with China, as illustrated by the increasing funding provided to the archipelago.



Last update: May 2020

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