Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

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Thematic analysis: Structural transformation and natural resources

Authors: Alassane Diabate, Riad Meddeb

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  • The serious energy crisis in the Comoros which has been going on for several years is handicapping economic activity and resulting in continued moderate growth.
  • The rise in the wages and salary bill and the funding of the legislative, municipal and council elections exacerbated budgetary tensions but the external position remains comfortable with more than 5.6 months’ cover of imports thanks to remittances from emigrants.
  • The Comoros is a small, densely populated archipelago of four islands (although Mayotte has remained under French administration) facing substantial spatial, economic and demographic disparities resulting in significant migrations, which in turn create serious political and social tensions.

Despite average growth of around 3% since 2011, the economy has not managed to achieve structural transformation. This, however, is vital to reduce poverty and deal with unemployment among the young, particularly graduates, which was more than 50% in 2014. The composition by sector of gross national product (GNP) in 2014 was dominated by the farming, forestry and fisheries sector (34.5%) followed by the trade sector, including hotels and restaurants (28.9%), and the public sector (13.1%). The production sector (water, electricity, building and manufacturing) accounted for only 11.0% of GDP. The main engines of growth were the agricultural (4.2%), construction (5.2%), trade and hotels (4.9%), public administration (8.2%) sectors and other services (8.3%).

The relatively stable political situation and the resumption of major external funding favoured growth (multilateral and in particular Arab bilateral). Even so, in 2014 the country saw arrears accumulate: both internal (salaries, payments to suppliers etc.) and external, resulting in the deterioration of the main budgetary balances. The overall cash basis current account surplus accordingly fell from 18.2% in 2013 to -0.6% in 2014. The trend should be reversed with a positive balance of 1.5% in 2015.

The state budget was affected by a rise in current expenditure in 2014, particularly in wages and salaries which grew by 10% compared with 2013. Furthermore the energy crisis led large businesses to turn to power generators, which increased their production costs and reduced their taxable turnover. This explains the government’s difficulties in mobilising internal resources as well as its cashflow problems.

Structural reforms are slow, especially in the key energy and telecommunications sectors, in spite of the commitment of the authorities, mainly because of the country’s weak institutional capacities. The country is therefore struggling to lay the foundations for sustainable economic growth that will create jobs. The energy crisis that began in 2010 continues, seriously hindering economic activity. It particularly affects the trade in imported food products, which provides the greater part of tax income. The resulting state cashflow crisis has led the government to make significant cuts in subsidies to the public electricity and water utility (Mamwe) which is no longer in a position to guarantee the means of production and the purchase of fuel. As a result the supply of electricity has been reduced to a few hours a day in the capital and much less in the other regions of the Comoros.

All economic activity is affected, especially the sectors in which vulnerable people, particularly women are concentrated: processing of agricultural products, processing of and trade in marine products, arts and crafts. Growth has remained at 3.5% thanks to an internal demand sustained by external resources. Foreign aid pays for investment, and remittances from emigrants fund household consumption. Internal production that creates jobs makes only a slight contribution
to growth.

The unemployment rate, put at 14% in 2003, keeps rising. It reached 24% in 2012 particularly affecting the 15-24 age group (52%). Confronted with this disturbing state of affairs the government has reacted by implementing the Strategy for Accelerated Growth and Sustainable Development (Stratégie de croissance accélérée et de développement durable [SCA2D]) 2015-19, designed to promote growth and create jobs. Its aims, however, can only be realised if a sustainable solution to the energy crisis can be found in the very short term.

Table 1: Macroeconomic indicators

Real GDP growth3.
Real GDP per capita growth1.
CPI inflation1.
Budget balance % GDP18.2-
Current account balance % GDP-5.7-7.8-6.9-8.5

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.