Guinea-Bissau, one of the world’s poorest and most fragile countries, has a population of about 1.9 million. Guinea-Bissau’s Atlantic Ocean coast is composed of the Bijagos archipelago of more than 100 islands. It borders Senegal to the north and Guinea to the south and east, and despite its size, is host to a large variety of ethnic groups, languages, and religions.
Guinea-Bissau has a history of political and institutional fragility dating back to its independence from Portugal in 1974. It is one of the most coup-prone and politically unstable countries in the world. Since independence, four successful coups have been recorded, with another 16 coups attempted, plotted, or alleged. Some progress has been made with the previous president, José Mário Vaz to be the first to complete a full term since independence. The 2019 presidential elections were followed by a political crisis that ended in April 2020 with ECOWAS recognition of Umaro Sissoko Embalo as President of the Republic. With the new government’s inauguration in March 2020, the country has registered political stability despite internal tensions and allegations of political interference in the judiciary. Next legislative elections are expected early 2023 and presidential elections at end of 2024.
- The economy contracted 1.4 percent in 2020, down from real GDP growth of 4.5 percent in 2019. This was driven by supply chain disruptions and reduced demand and economic activity, caused by pandemic containing measures and policies. Inflation increased to 1.5 percent, from 0.3 percent in 2019. The overall fiscal deficit increased from 4 percent of GDP in 2019 to 9.5 percent in 2020. Tax revenue fell from 10.2 percent to 8.4 percent, equating to a wage-to-tax-revenue ratio of approximately 80 percent. On the expenditure side, total government spending increased from 19.3 percent of GDP in 2019 to 25.8 percent in 2020. Public debt reached 79.3 percent as a result.
- Real GDP growth is projected to reach 3.3 percent (3.6% in per capita terms) in 2021, as the vaccination program gains traction, international demand for cashew recovers and lockdown measures end. A recovery in international prices and strong preliminary domestic production and export figures for cashew will help close the fiscal deficit to 5 percent. Debt is forecasted to fall to 78.4 percent of GDP. Inflation is projected to rise to 1.9 percent and remain steady in the mid-term.
The outlook is subject to substantial downside risks. Renewed political instability could cause fiscal slippages and exacerbate the already difficult business environment. Lower cashew prices in the future or quantities exported would also pose a risk. The persistence of the COVID-19 crisis could adversely affect household income and increases their risk of falling into poverty. Risks associated with banking instability also remain a threat to macro-financial stability.
A steep increase in oil prices would also put pressure on the external current account balance and leave less resources for pro-poor government spending. Addressing high inequality in the country also requires efforts to improve service delivery and enhance access to basic services. However, accelerating or even sustaining the pace of poverty reduction will be difficult if the political situation remains unresolved, and if the major development challenges that constrain growth, inclusiveness, and sustainability are not addressed.
Last Updated: Sep 30, 2021