The Republic of Sao Tome and Principe (STP) is a lower middle income, small island state with a fragile economy. It is highly vulnerable to exogenous shocks. An archipelago divided into six districts and the Autonomous Region of Príncipe (Região Autónoma do Príncipe), it is located in the Gulf of Guinea, 350 km off the west coast of Africa. With a surface area of 1,001 sq. km, this Portuguese-speaking country has a population of over 215,000 people, and a Gross National Income (GNI) per capita of $1,960 as of 2019.
STP has been a model of democratic transition of power in Central Africa and this was reinforced last August when the second round of presidential elections were held. The highly contested elections were won by the candidate supported by the opposition and the other candidates not only conceded defeat in a peaceful manner but also committed to work together with the new president.
The government is led by the Movement for the Liberation of Sao Tome and Principe – Social Democrat Party (MLSTP-PSD), thanks to a post-election agreement with the coalition PCD-MDFM-UDD, giving them a majority in parliament. The next parliamentarian and local elections are scheduled for October 2022.
The National Assembly has 55 seats, with 25 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 (MCISTP).
Despite methodological issues, there is a consensus that poverty levels have 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 the international poverty line of $1.90 per day, and over two-thirds of the population is poor, using the World Bank higher poverty line of $3.20 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 index and has made progress improving other social indicators. It has a gross primary school enrollment of 110%, a life expectancy of 66 years, a mortality rate of children under five years old of 51 per 1,000 live births, access to an improved water source for 97% of the population, and access to electricity for 60% of the population.
STP faces challenges that are typical for small and insular states and affect its ability to deal with shocks and maintain fiscal and external balance. The limited number of people and workers in the country often prevents 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 costs, preventing the country from diversifying its economy, and making it more vulnerable to terms-of-trade shocks. The indivisibility in the production of public goods, and the difficulty of providing services to a scattered population imply a high cost of public goods and a high level of public expenditure is required to provide adequate public services.
STP’s growth in the last two decades was driven mostly by government expenditure propelled by external aid and government borrowing along with by agriculture, tourism and foreign direct investment fueled by expectations for oil production.
Gross domestic product (GDP) grew at an average rate of more than 4 percent between 2010 to 2019, though decelerating to below 3 percent in 2018-19 due to severe power outages, government arrears to local suppliers, and crowding out of domestic financing. Agriculture and fisheries were also affected by weather shocks and agricultural pests. The COVID-19 pandemic affected STP as the country recorded a high rate of infection and the tourism industry, which had been a driver of private sector growth, came to a halt in March 2020. However, with significant external financing, the government was able to offset tourism workers’ lost income and other negative impacts on economic activity. According to official data, STP’s real GDP grew by 3.1 percent in 2020 despite the disruptions caused by the COVID-19 pandemic. Higher public expenditures on COVID-19 relief and other projects financed by exceptional international financial support have supported this growth performance. Despite an expected deceleration due to the unwinding of the externally-financed fiscal impulse, real GDP growth is projected to reach 2.1 percent in 2021 due to a strong upturn of the agricultural sector led by the global economic recovery, and a mild improvement of the tourism sector as the international travel gradually resumes.
The World Bank has supported STP since the beginning of the pandemic by providing quick financial assistance, including a $2.5 million grant for the health, additional financing for social protection, and budget support operation of $10 million.
Last Updated: Apr 07, 2022