Authors : Adalbert Nshimyumuremyi, Yemesrach Assefa Workie
Gambia’s economic performance has been affected by a series of external shocks. The impact of the regional Ebola outbreak on tourism and delayed summer rains in 2014, together with weak economic policy implementation, led to a contraction in real gross domestic product (GDP) growth to 0.9% in 2014, sharply down from an initial estimate of 7%. Growth is projected to rebound to 4.7% in 2015 and to 5.5% in 2016 due to a recovery in tourism and agriculture.
The country has experienced large fiscal imbalances, caused by persistent policy slippages in recent years and financial difficulties in public enterprises. Higher than budgeted levels of spending pushed the overall fiscal deficit from 4.4% of GDP in 2012 to 11% in 2014 and around 9.6% in 2015. The fiscal deficit is largely financed from domestic borrowing due to difficulties in mobilising external resources. This has led to an increase of ten percentage points since mid-2013 in the government’s one-year treasuries borrowing interest rate, which reached 21.9% in November 2015. The stock of public debt rose from just below 70% of GDP at end-2010 to 108% by end-2015. Consequently, interest payments on public sector debt increased to absorb 40% of government revenues in 2015, up from 25% in 2013. The outlook for 2016 is clouded by policy slippages related to financing another large programmed deficit of 9.3% of GDP. Associated with the fiscal deficit, Gambia experienced a significant balance of payments crisis, which led to a decrease in its official reserves from six months of import cover at end-2012 to less than three months in early 2016. Inflation hovered at around 6.5% at the end of 2015, up from around 5.3% in 2013.
Despite the enormous opportunities that urbanisation offers in Gambia, it has been perceived as a risk in recent decades. This is largely due to rapid and unplanned urbanisation that has resulted in large-scale flooding and other environmental hazards, as well as pressure on social services. Almost 50% of Gambia’s population live in urban areas. To date, urbanisation has not been guided by a comprehensive policy or strategy despite the fact that urban areas generate a large share of the economy and employment opportunities. Urbanisation is largely driven by high rural-urban migration and high population growth. The lack of adequate policy frameworks and the weakness of institutions have significantly undermined the potential of urbanisation and the management of its associated risks.
Africa: economic transformation hinges on unlocking potential of cities, says the African Economic Outlook 2016
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