The Gambia is a small and fragile country in West Africa. It stretches 450 km along the Gambia River. Its 10, 689 sq. km area surrounded by Senegal, except for a 60 km Atlantic Ocean front. The country has a population of 1.9 million. With 176 people per square kilometer, it is one of the most densely populated countries in Africa. Most of the population (57%) is concentrated around urban and peri-urban centers.
Presidential elections on December 1, 2016 resulted in a political transition after the incumbent President Yahya A.J.J. Jammeh, who had led the country for 22 years, was defeated by Adama Barrow, who garnered 43.3% of the vote. The Parliamentary elections in April 2017 led to an absolute majority for Barrow’s United Democratic Party (UDP) with 36in the 53-seat National Assembly. The former ruling Alliance for Patriotic Reorientation and Construction (APRC) party was reduced to five seats. In the recent local elections, 62 of the 120 seats went to the UDP and 18 to the APRC.
The Gambia has a small economy that relies primarily on tourism, rain-dependent agriculture, and remittances, and is vulnerable to external shocks. In recent years, the economy was hit by economic shocks in agriculture caused by erratic rainfalls and in tourism caused by the spillover effects of the regional Ebola crisis and the political crisis during 2015-2016.
The economy recovered strongly in 2017, with growth estimated at 4.6% (below potential), up from 0.4% in 2016. Robust growth in the service sector (10.6%), mainly in commerce, drove this recovery. Tourist arrivals turned around in the second half of 2017. However, agriculture contracted by 8.1% due to uneven distribution of rainfall.
Strengthened fiscal discipline and substantial donor support reduced the fiscal deficit from 6.5% of gross domestic product (GDP) in 2016 to 5.4% in 2017. These led to a sharp decline in net domestic borrowing from 8.4% of GDP in 2016 to –0.5% in 2017. Expenditure ceilings have helped, but tax collection declined from 11.1% of GDP in 2016 to 10.2% of GDP in 2017.
Public debt increased from 82.3% of GDP in 2016 to 88% in 2017 due to the low growth, the fiscal deficit, higher loan disbursement, recognition of external private debt, and debt reconciliation with creditors. As a result, The Gambia is currently in external debt distress and public debt is unsustainable. Interest payments consumes an inordinate share of available government revenues (42 in 2016 and 2017), leaving very little fiscal space to improve service delivery and undertake the public investments in physical and human capital needed to support the emergence of a thriving private sector.
The exchange rate was fully liberalized, and the Dalasi has remained stable since April 2017 at around 47 Dalasi per U.S. dollar. The reduction in net domestic borrowing prompted the three-month T-bill interest rate to drop from 17.5% in October 2016 to 6.8% in May 2018. Central Bank official foreign reserves have increased from 1.4 months of import cover in 2016 to 2.9 in 2017.
The key long-term development challenges facing The Gambia are related to its undiversified economy, small internal market, limited access to resources, lack of skills necessary to build effective institutions, high population growth, lack of private sector job creation, and high rate of outmigration.
Economic growth is projected to accelerate to 5.4% in 2018 and 2019 and 5.2% in 2020 but will remain slightly below potential. This assumes a strong recovery in tourism and trade, a normal agricultural season, and improvements in electricity provision. Political stability, combined with improved macroeconomic conditions, would help strengthen investment activity. Economic activity would also be underpinned by key infrastructure developments, notably energy supply, as well as improved trade and re-export trade.
However, a legacy of fragility across various dimensions pose a risk for the medium-term outlook. The limited capacity of public institutions hinders public policy and its implementation. The Gambia’s growing debt leaves little fiscal space to reinvigorate the economy and ensure inclusive growth. The share of immigrants has reached almost 10% of the population. While the loss of labor to migration has long slowed the country’s economic development, remittance income is an increasingly crucial component of household consumption. A high propensity to erratic rainfalls exacerbates vulnerability to food insecurity and volatility of growth.
Last Updated: Nov 01, 2018