Although the São Tomé & Príncipe’s (STP) economy remains vulnerable to external and domestic shocks, its outlook remains positive. The country’s gross domestic product (GDP) is expected to grow from 4.1% in 2014 to 4.4 % in 2016. The annual average rate of inflation has trended downward consistently each year, from 26% in 2008 to 6% in 2015.
The country has also registered significant improvements in human development front. It ranks 144th out of 186 countries in UNDP’s Human Development Index (HDI), higher than the average in Sub-Saharan Africa and with consistently improving indicators. Great strides have been made in education and health outcomes. Recent achievements include a sharp decline in maternal and child mortality rates due in large part to an increase in the proportion of births attended by skilled birth attendants. Important progress has been achieved in the fight against malaria, with a record low incidence as well as HIV/AIDS prevalence at less than 1.5%. STP has also registered excellent progress in education, especially in primary education and is close to achieving the primary education completion rate at 97%. Secondary education does not yet have universal coverage with supply limited to main urban areas.
Despite those remarkable achievements, the country is rated a Fragile State as assessed using the Multilateral Development Bank measurement, which is based mainly on the country’s economic vulnerability and insularity, and its vulnerability to unpredictable shocks, such as food shortages, climate change. With limited progress in poverty reduction, unemployment continues to be high, especially among women and youth population, and pockets of chronic malnutrition and infant mortality remain a concern.
STP has been largely free of conflict and political violence since holding its first multiparty elections in 1991. However, internal political wrangling has caused repeated changes in governments and two failed coups in 1995 and 2003.
The Acção Democrática Independente (ADI), led by the former Prime Minister, Patrice Trovoada, won a decisive victory in the October 2014 legislative election, securing an absolute majority with 33 out of 55 seats in parliament. This was a surprising result in a country accustomed to fragile, multiparty coalition governments. The Movimento de Libertação de São Tomé e Príncipe Partido Social Demócrata (MLSTP PSD), which governed the country in 2012-14, won 16 seats, and will be the main opposition party.
Political stability is likely to improve given Mr Trovoada's outright majority in parliament. No government has lasted its full term since 1990, but without the threat of censure votes, Mr Trovoada could remain in power for the next four years, assuming that he can keep his party united. There were some signs of internal squabbles in the lead up to the election, culminating in the departure in August of Nelson Carvalho, the head of the municipal council of Mé Zóchi (the second most populous district). However, Mr Trovoada's convincing victory will fortify his position within the party.
The main source of political tension is likely to be an uncomfortable political cohabitation between Mr Trovoada's government and the presidency of Manuel Pinto da Costa, an independent but a former leader of the MLSTP PSD (which now finds itself in opposition). Trovoada blames Pinto da Costa for his role in the ejection of the ADI-led government via a parliamentary no confidence vote in 2012.
In mid-2014, Trovoada filed a complaint with the International Criminal Court in The Hague, accusing Pinto da Costa and the former prime minister, Gabriel Costa, among others, of political persecution of their opponents. Although nothing is likely to come of this, it underscores the frictions between the two camps. The period of political cohabitation, which will last at least until the presidential election due in 2016, will not prevent state institutions from functioning, but it may slow down policymaking.
There are also significant risks to social stability. The country's heavy dependence on imports of essential goods will leave it vulnerable to bouts of rapid consumer price inflation in the event of supply shocks. Ongoing power cuts, poor provision of basic social services and recurrent allegations of financial irregularities in the public sector also risk undermining support for the government.
The next national election is the presidential ballot, due in 2016. The incumbent president, Pinto da Costa, who will turn 79 in 2016, is yet to indicate whether he will seek another term. Trovoada is likely to seek to capitalize on his convincing win in the 2014 legislative election, either by standing for the presidency himself or by supporting a close ally for the position. His or the ADI candidate's prospects will depend on how he and the party perform in government until then. Although they will benefit from having access to state resources, failure to improve living standards and make progress on job creation and infrastructure investments will weaken their chances. During the 2014 legislative poll, the ADI was able to exploit the worsening divisions within the MLSTP PSD, which lost three senior members ahead of the election. As a result, the MLSTP PSD's prospects in 2016 will partly depend on its ability to limit the damages caused by defections and restore voters' confidence in its ability to oversee the country's affairs. Source: Economic Intelligence Unit, April 2015.
While STP faces complex set of challenges, it also has a number of opportunities it can capitalize on. Its challenges mainly stem from its isolated setting, its limited internal market, an undiversified economy, environmental degradation and climate change, frequent turn-over in government, as well as management of revenues from incipient – though uncertain – oil sector. Nonetheless, STP has significant opportunities to diversify its economy through tourism, fisheries, hydropower as well as oil production. Access to education and health have markedly improved (though quality remains an issue), positioning STP well to make strides in economic growth and poverty reduction.
The Government of Sao Tome and Principe (GoSTP) has prepared its second poverty reduction strategy paper (PRSPII), which identifies and sets forth the country’s priority areas of intervention for a five-year period (2012-2016). The PRSP II focuses on four pillars:
- Promoting good governance and public-sector reform;
- Supporting sustainable and inclusive economic growth;
- Enhancing human capital and extending basic social services; and
- Reinforcing social cohesion and social protection, particularly for vulnerable population groups.
In order to achieve the above vision, the following general strategic objectives have been defined: i) maintaining an annual GDP growth rate of at least 6% in order to facilitate consistent diversification of the economy, reducing the percentage of the population living in poverty by 10 percentage points through promotion of income generating initiatives so as to improve the economy’s productive capacity, and improving access to basic social services to the entire population.
Last Updated: Apr 16, 2015