The Republic of Sao Tome and Principe (STP) is a lower middle income, developing,
The results of the October 7, 2018 elections reinforced the notion of Sao Tome and Principe being a model of democratic alternation in Central Africa. The Movement for the Liberation of Sao Tome and Principe – Social Democrat Party (MLSTP-PSD) now leads the government, thanks to a post-election agreement with the coalition PCD-MDFM-UDD which gives them a majority in parliament.
The National Assembly is comprised of 55 seats, of which 25 are currently held by the Independent Democratic Action Party (ADI), 23 by the MLSTP-PSD, five by the coalition PCD-MDFM-UDD and two by the Sao Tome and Principe Independent Citizen Movement (
Despite methodological issues, there is a consensus that poverty incidence has not changed significantly between the last two household surveys (2000 and 2010). Recent World Bank estimates show that about one-third of the population lives on less than $1.9per day, and more than two-thirds of the population is poor, using a poverty line of $3.2 per day. Urban areas and southern districts such as Caué and Lembá have higher levels of poverty incidence.
STP performs higher than the Sub-Saharan Africa average on the UNDP Human Development
STP faces challenges that are typical of small and insular states and affect its ability to deal with shocks and achieve a balanced budget. The limited number of people and workers in the country often prevent the efficient production of goods and services at the scale needed to meet the demand of both local and export markets. Its remoteness and insularity increase export
STP has grown driven by agriculture, tourism, oil-fueled foreign direct investment, but mostly by government expenditure propelled by external aid and government borrowing. Gross domestic product (GDP) has grown at an average rate of 4.5% between 2009 to 2017 but has been decelerating since 2014. The slowdown in growth has been caused by lower government spending on the back of reduced external aid, lower tax revenues, and government overborrowing. The economy was severely hit in 2018, by an energy crisis that in its most acute time reduced energy supply by 75%.
The country runs large structural external deficits because of its small production base. Its current-account deficit (excluding official transfers) declined from 20.2% of GDP in 2016 to 18.8% in 2017. The main contributing factor to the improvement in the external accounts was a decline in imports since exports of goods – which are highly concentrated in cocoa - remained stable.
STP also faces serious fiscal problems – having recorded budget deficits in nine out of the last ten years. The domestic primary deficit stood at an estimated 2.3% of GDP in 2018, despite strong budget cuts, due to the very low domestic revenue levels in STP (12.5% of GDP). This growth boosted by public expenditures led the government to increase external debt and accumulate large domestic arrears for a total debt around
The new administration needs to act urgently to address the serious fiscal imbalances by raising domestic revenues and curb indebtedness.
STP will continue to face significant challenges to overcome insularity, small market size, vulnerability to natural shocks and climate change, limited human capital, and scarce tradable resources to generate sustainable and inclusive growth and reduce poverty.
The long-term challenge for STP is to move from ambitious plans to feasible actions that will help make the economy more dynamic and generate more jobs for the youth population.
Lack of up-to-date poverty data undermines efforts aimed at reducing poverty in the country. A
Last Updated: Mar 28, 2019