Ekonomske analize
Sao Tome and Principe

Sao Tome and Principe

Population 0.2 million
GDP 1,847 US$
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major macro economic indicators


  2016 2017 2018 (e) 2019 (f)
GDP growth (%) 4.2 3.9 4.9 4.0
Inflation (yearly average, %) 5.4 5.7 7.2 6.0
Budget balance (% GDP)* -4.2 -2.6 0.4 -3.5
Current account balance (% GDP)** -6.5 -8.2 -7.0 -10.3
Public debt (% GDP) 93.1 88.4 76.9 73.7

(e): Estimate. (f): Forecast. *Including grants. **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 costs due to remote island location
  • Underdeveloped and weak banking sector


Growth dependent on external financing

Activity is set to accelerate in 2019 after being held back in 2017 and 2018 by the slowdown in construction resulting from the decline in external financing and by the high level of non-performing loans, which constrained credit growth. The launch of new projects – made possible by external financing, particularly from China – should strengthen the construction sector. In particular, efforts to build and upgrade roads and restore the electricity grid are expected to continue, while work to expand the international airport is scheduled to start in 2019. These infrastructure projects are aimed notably at supporting the development of the tourism sector, which should continue to expand. Beginning in 2019, the sector could start to see the effects of the strategy to develop and promote tourism adopted at the start of 2018. However, it is still expected to suffer from the weakness of the local banking sector, which is expected to further dampen credit growth. More generally, this problem is likely to continue to be a drag on all services. Agriculture and, to a lesser extent, fisheries will contribute to growth. With the cocoa sectors in Ghana and Côte d'Ivoire, which account for nearly 60% of world production, expected to face continued headwinds, exports of São Toméan cocoa (renowned for its quality) could benefit. Strong performances by the agriculture and tourism sectors should boost household consumption, but the introduction of VAT, scheduled for 2019, and high inflation will have an adverse impact.


Fiscal consolidation to reduce the debt burden

The overall budget deficit is expected to widen in 2019, mainly in line with the trend in capital investment expenditure financed by bilateral and multilateral donors. Conversely, the domestic primary deficit – which notably excludes grants, subsidies and associated expenditure – should continue to decline, thanks to efforts to limit the growth in current expenditure, especially the state's wage bill. The pending introduction of VAT in 2019 should make it possible to raise more domestic resources, which remain low and continue to constrain São Toméan fiscal policy, which is exposed to the volatility of external financing. Efforts to collect tax arrears from large taxpayers could also result in higher revenues. Despite the work being done to reverse the debt trajectory, the risk associated with debt sustainability remains very high. Restructuring negotiations notwithstanding, the country remains in arrears with some bilateral creditors (Brazil, Angola, Equatorial Guinea). Domestic arrears, mainly with struggling state-owned public companies, also weigh on debt.

São Tomé and Principe’s remote island location will continue to fuel the archipelago’s trade deficit and consequently its current account deficit. In 2019, imports of capital goods needed for infrastructure projects and oil exploration are expected to continue to widen the trade deficit, despite the likely increase in exports of goods, mainly cocoa, and services, chiefly related to tourism receipts. International cooperation and expatriate funds will contribute to the transfer surplus, while the income balance will continue to make a minor contribution to the current account balance. 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 (still equivalent to more than four months of imports) on which the sustainability of the dobra's peg to the euro depends.


Parliamentary elections usher in a new political situation

The Independent Democratic Action (IDA) won the October 2018 parliamentary elections, but lost its absolute majority, taking 25 seats out of 55. Following the elections, the Movement for the Liberation of São Tome and Principe – Social Democratic Party (MLSTP-PSD), which won 23 seats, joined forces with several small parties (PCD-UDDD-MDFM) that won five seats, in order to secure an absolute majority and form a government. At its helm, Jorge Bom Jesus succeeds Patrice Trovoada as Prime Minister, leading to a cohabitation with President Evaristo Carvalho, elected in 2016 and a member of the IDA, which could slow down policymaking. Questions remain over whether this coalition will remain stable over the entire parliamentary term.

The country’s infrastructure deficit and weak legal and regulatory environment are a constraint on the business environment, which came 170th out of 190 countries in the 2019 Doing Business ranking.

Externally, cooperation will remain crucial for the archipelago. Relations with Portuguese-speaking countries, including Portugal, Angola and Brazil, remain very important. Since recognising the One China policy at Taiwan's expense in 2016, São Tome and Principe has improved relations with China. Cooperation with Nigeria could also be stepped up as part of offshore oil exploration in the Joint Development Zone.


Last update : February 2019