The Republic of Sao Tome and Principe (STP) is a lower middle income, developing, 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 more than 215,000 people, and a Gross National Income (GNI) per capita of $1,960 as of 2019.
Political Context
The October 7, 2018 elections results 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 PCD-MDFM-UDD Coalition, 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 PCD-MDFM-UDD Coalition, and two by the Sao Tome and Principe Independent Citizen Movement (MCISTP).
Presidential elections are scheduled for July 2021.
Social Context
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 the international poverty line of $1.90 per day, and more than 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 United Nations Development Programme’s 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.
Economy
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 costs prevent the country from diversifying its economy, 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 expenditures required to provide adequate public services.
STP’s growth in the last two decades was 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) grew at an average rate of more than 4% between 2010 to 2019, though decelerating to below 3% 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 (coronavirus) 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, has come to a halt since March 2020. The tourism industry, which in recent years has been a driver of growth, is responsible for a 5% of formal employment. However, with significant external financing, the government was able to offset tourism workers’ lost income. According the pre-liminary data, STP saw real GDP growth of 3.1% 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 are believed to be the drivers of this result. 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 22, 2021
