The Republic of Sao Tome and Principe is an archipelago in the Gulf of Guinea, 350 km off the west coast of Africa, composed of six districts and the Autonomous Region of Príncipe (Região Autónoma do Príncipe). A Portuguese-speaking country, it has a population of about 225,000 (2021). Classified as lower-middle-income, it is a small island state with a fragile economy highly vulnerable to exogenous shocks.
Political Context
Sao Tome and Principe is a multiparty, semi-presidential, democratic system since its independence and it has been a model of democratic transition of power in Central Africa. The last elections held on September 25, 2022 were won by the Independent Democratic Action (ADI), which won 30 of the parliament's 55 seats. ADI will therefore form the government which will lead the country for the next four years.
The National Assembly will be composed of four political parties, namely ADI with 30 seats, MLSTP-PSD (which governed the country in the previous legislature) with 18 seats, MCI-PUN with five seats, and BASTA with two seats.
Social Context
Recent World Bank estimates show that about one-third of Sao Tome and Principe’s population lives on less than the lowest international poverty line of $1.90 per day, and over two-thirds of the population is poor, using the World Bank’s higher poverty line of $3.20 per day. Urban areas, and southern districts such as Caué and Lembá, have even higher levels. Nonetheless, Sao Tome and Principe has made progress on improving social indicators, with a gross primary school enrollment rate of 110%, life expectancy of 66 years, a mortality rate for children under five-years-olds of 51 per 1,000 live births, access to improved water sources for 97% of the population, and access to electricity for 60% of the population.
Economy
Sao Tome and Principe faces challenges typical of small island states that affect its ability to deal with external shocks to its economy and maintain its fiscal and external balances. The limited number of people and workers inside the country prevents the efficient production of goods and services at a scale needed to meet the demand of both local and export markets. Its remote location increases export costs and prevents it from diversifying its economy, making it more vulnerable to terms-of-trade shocks. A challenging business environment and fragile energy sector have also undermined private sector development. Difficulties in the production and provision of service for a scattered population, mean a high cost of public goods and high level of public expenditure are required to provide adequate public services. Nonetheless, Sao Tome and Principe ‘s growth in the last two decades has been driven mostly by government expenditure, propelled by external aid and government borrowing, along with agriculture and tourism—and some foreign direct investment fueled by expectations of oil production.
Gross domestic product (GDP) grew at an average of more than 5% between 2010 and 2014, decelerating to below 3.5% between 2015 and 2019 due to severe power outages, reduced, externally financed public investments, and lower performance in tourism. Agriculture and fisheries were also affected by weather shocks and agricultural pests.
The COVID-19 pandemic affected Sao Tome and Principe, with the country recording a high rate of infection, and the tourism industry, which had been a driver of private sector growth, coming 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% 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. However, Real GPD growth is estimated to have lowered to 1.8% in 2021 due to a slow recovery of tourism, persistent energy shortages, and lower external financing for public investments. While the tourism sector began to recover significantly in the first half of 2022, helped by the resumption of international travels and progress on vaccination, the economic outlook remains subject to high uncertainty and downside risks, owing to climate-related events, and the increased global geopolitical tensions following the Russia´s invasion of Ukraine, which is being reflected in higher global food and fuel costs. 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 sector, additional financing for social protection, and budget support operation of $10 million.
Last Updated: Oct 06, 2022
