Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

Economic & Political Governance

Private Sector

Financial Sector

Public Sector Management, Institutions & Reform

Natural Resource Management & Environment

Political Context

Social Context & Human Development

Building Human Resources

Poverty Reduction, Social Protection & Labour

Gender Equality

Thematic analysis: Structural transformation and natural resources

Authors: Adalbert Nshimyumuremyi , Yemesrach Assefa Workie

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  • Economic growth contracted from 4.3% in 2013 to an estimated -0.7% in 2014 due to the effects of Ebola on tourism-related activities, the delayed rains experienced in 2014 and continued macroeconomic policy challenges.
  • The fiscal balance continued to deteriorate in 2014 while international reserves were under pressure from the massive injection of liquidity on account of the country’s net domestic borrowing.
  • Local and physical development policies are central in the Gambia’s development agenda but are not fully implemented, resulting in poor service delivery and a significant rural-urban imbalance.

    Following the 2011 drought-induced contraction of the Gambia’s gross domestic product (GDP), the country’s economy recovered moderately in 2012 and in 2013. GDP growth in 2014 is estimated to have contracted to about -0.7%, compared to earlier estimated GDP growth of 7%. The principal factors behind the poor growth outturn are the decline in tourism earnings and reduced agricultural outputs due to delayed rains in 2014. The Ebola epidemic in the sub-region has had an adverse effect on tourism and related sectors, with hotel cancellation rates reaching 60% for the 2014/15 winter season. Delayed and erratic rainfall in 2014 is expected to lead to a significant decline in crop production.

    Macroeconomic policy slippages as evident in continued large fiscal deficits and heavy debt burden (estimated at 8.7% and 100% of GDP, respectively, in 2014) continue to pose major challenges. In particular, interest payments consume about 22.5% of government revenues (including 81% devoted to domestic debt). The net domestic borrowing (NDB) rate is expected to reach 12% of GDP at the end of 2014 against the less than 2.5% projected at the beginning of the year. As of end-2014, the main targets stipulated in the IMF Extended Credit Facility (ECF) were off track. The IMF has confirmed its willingness to grant a Rapid Credit Facility (RCF) and provide emergency financial assistance to respond to the country’s external shocks (Ebola and the drought) provided that the authorities implement a series of policy measures including in particular restructuring the energy sector.

    With 173.6 persons per km², the Gambia is one of the most densely populated countries in Africa, which exerts extreme pressure on the country’s limited productive land and prevents social services from being adequately provided. Owing to a rapid population growth, a high urbanisation rate and divergent growth in income and wealth, spatial inequality remains a critical issue in the Gambia. Despite the development of legal frameworks to counter it, there is a large urban-rural gap in income and wealth. In addition, unplanned rapid urbanisation is taking place, resulting in significant environmental degradation. The major reasons for the relatively weak outcome of decentralisation and local development include inconsistent policies related to local-government responsibilities and autonomy, and poor implementation of decentralisation and local-government policies, in particular of the 2004 Local Government Finance and Audit Act.

    Table 1: Macroeconomic indicators

    Real GDP growth4.3-
    Real GDP per capita growth1.2-
    CPI inflation5.
    Budget balance % GDP-8.6-8.7-3.5-1.4
    Current account balance % GDP-10.9-12.7-12.4-10.5

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