• Projected real GDP growth of about 5% in 2017 and 2018 is expected to strengthen the post transition recovery but political uncertainty remains an obstacle to a tangible economic take-off.
  • Economic and social prospects remain fragile because they depend strongly on the cashew sector, on the continuity of reforms undertaken and on the political environment.
  • The industrialization of Guinea-Bissau requires basic infrastructures to be rebuilt, especially for transport and energy, which cannot currently support the blossoming secondary sector; it also requires an improved business climate and stronger human capital.

During the year that followed the return to constitutional order in 2014, Guinea-Bissau experienced positive momentum. Since then, however, it has gone through a period of uncertainty. Between June 2015 and December 2016, four prime ministers were dismissed. The ensuing institutional deadlock prevented parliament from meeting in 2016. Despite the delicate political context, gross domestic product (GDP) grew by an estimated 4.9% in 2016, driven by a good agricultural season. Economic performance thus remains strongly exposed to exogenous shocks.

The recovery that began following the return to constitutional order is continuing, aided by an exceptional year for cashew sales and a notable expansion in the harvest of food crops (8.9%). Political uncertainty has harmed growth potential, however. The government has in fact contributed negatively to GDP (-0.5%). Furthermore, the political climate does not favor investment, which has also had a negative impact on the potential for growth and the quality thereof. Additionally, 2016 saw a freeze on budgetary support from donors due to a secretive bank rescue by the authorities in 2015, at a cost of XOF 34.2 billion (CFA Franc BCEAO), or 5.6% of the GDP. Budgetary support is expected to be available again in 2017, based on commitments made by the authorities to undo the bank rescue. Growth forecasts for 2017 and 2018 are 4.8% and 5.0% respectively, assuming that current political tensions are resolved, rainfall is equal to that of 2016, cashew prices hold up, investment in phosphates begins (production is due to commence in 2019) and reforms continue in the right direction.

Certain measures implemented in 2014-15 to reform public finance management have continued to bear fruit, particularly in the fiscal sector. In 2017 and 2018, planned reforms regarding revenue, such as a new single invoice with a tax identification number, should strengthen prospects and create additional revenue. Expenditure, meanwhile, was higher than in 2015, due in particular to domestic debt repayments. The tax-GDP ratio stalled at 9.6%. The budget balance was -4.0% of GDP and the primary balance -3.3%. Finally, against the backdrop of recovering demand, inflation was an estimated 2.6%.

The social and human development context have not changed significantly since last year and the overall situation remains worrying. Guinea-Bissau has one of the lowest human development indicators (HDI). Significant weaknesses still exist, especially as regards women and the rural population. No budget was approved for 2016, so no efficient plans could be made for social sectors. Because of fiscal difficulties, chronic under investment is expected to continue, preventing any meaningful improvements in terms of human development.