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Guinea-Bissau
Key Facts
- Capital: Bissau
- Region: West Africa
- Official language: Portuguese
- Independence Day: September 24, 1973
- Area: 36,125 sq km
- Population (2018): 1.9 million
- REC membership: CEN-SAD, ECOWAS
- WTO membership: May 31, 1995
- GDP (2018): US$ 1.458 billion
- GNI per capita (2018): US$ 750
- Currency: CFA franc
Economic overview
GDP grew by an estimated 5% in 2019, driven mainly by private consumption and exports. Economic performance remains highly correlated with the volumes and prices of cashew nuts. Considered the “green oil” of Guinea-Bissau, the nuts account for almost 70% of employment and more than 90% of exports. Inflation is estimated to remain below 3%, despite increase in oil prices. Underperforming cashew exports in 2018 translated into lower revenue as agriculture is the main source of domestic revenues.
The effect of the lower cashew price is expected to constrain the 2019 and 2020 budget. With lower revenues and higher spending, the budget deficit rose to 5.1% of GDP in 2018, but then declined to an estimated 2.8% in 2019. To finance the deficit, public debt securities totaling 10 billion CFA francs were issued in September 2019, leaving public debt in 2019 at an estimated 27%. The current account deficit worsened from 1.6% of GDP in 2018 to 3.4% in 2019, reflecting the lower cashew nut export prices. The country depends heavily on imports, dominated by machinery and construction materials (19%), fuel and refined products (18%), services (16%), and food and agricultural products (12%).
India remains the main trading partner, receiving more than 80% of unprocessed cashew exports. About 67% of the population lives in poverty and 33% in extreme poverty. Inequality is high. Unemployment is 11.6%, and informal workers are a structural problem.
GDP is projected to grow at 5% in 2020, driven by greater cashew production volume and stable prices. Institutional reforms are laying the foundation for more private participation. Efforts to attract private investments include creating an Investment and Export Promotion Agency and signing the Lusophone Country-specific Compact. The Central Bank of the West African States has launched a mechanism to finance domestic small and medium enterprises.
Domestic initiatives will increase electricity and water availability, improve cashew marketing, and address weaknesses in the banking sector. That should boost private sector confidence and contribute to growth and macroeconomic stability To improve employment opportunities and the macroeconomic climate, new investments include operationalizing a new cement factory in Bissau, completing the Buba-Catió road, and creating a line transmitting energy from the Kaleta and Sambangalou subregional hydropower plants as part of the Gambia River Basin Development Organization energy connectivity project.
Regional integration commitments under the Africa Continental Free Trade Agreement should lift trade and growth limitations imposed by the small economy. Agriculture needs large-scale investment and a business environment that promises returns to value chain investors. But the lack of an updated budget undermines development planning and implementation. Adverse terms of trade could undermine growth and weaken domestic resource mobilization. Repeated cashew price shocks could discourage many smallscale producers and reduce national output and exports.
Lower cashew prices could worsen key debt-sustainability indicators, such as the debt-to-export and the debt-to-revenue ratios. Higher-than-expected oil prices could reduce domestic production and undercut revenues. The vulnerability of agriculture and fishing to climate change challenges the livelihoods of more than 70% of the population. Irregular precipitation and frequent flooding in coastal and island regions threaten the economy and the population, especially the large proportion of poor and vulnerable households with limited alternative livelihoods.
Last updated: April 2020