Sierra Leone’s economy contracted by 2% as the COVID-19 pandemic led to slowdown in all sectors following global supply chain disruptions and lockdown measures. GDP per capita fell by 4% in 2020, reversing some of the recent gains in poverty reduction. Real GDP is expected to rebound by 4.2% in 2021, reflecting the easing of COVID-related restrictions as well as the implementation of the government’s fiscal response to the pandemic. On the demand side, growth will be driven by domestic demand (as external demand remains subdued), with private consumption and investment contributing the most.
Headline inflation fell to 8.9% in March 2021, before rising sharply to 10.2% by end June, reflecting an increase in food and fuel prices. Food inflation reached 17.1% in June 2021, well above its pre-COVID-19 level of 9.9%. The current account deficit is expected to improve by 1 percentage point to 16.4% of GDP in 2021, reflecting higher export receipts from the mining sector. In 2021H1, total public expenditure reached 12.3% of GDP while total revenue collection totaled 6.9% of GDP. The overall budget deficit is projected to decline to 3.8% of GDP in 2021. Public debt is estimated to decline to 72.9% of GDP in 2021, although the risk of external and overall debt distress was assessed as high in June 2021.
Risks and Challenges
Sierra Leone’s medium-term outlook is subject to downside risks. COVID-19 risks reflect limited access to vaccines including slow pace of the vaccination program and a resurgence of the pandemic. The main domestic macroeconomic risks are continued high public debt and domestic payment of arrears, slower than expected revenues, and rapid growth in monetary aggregates, including the associated inflationary risks and financial sector weaknesses.
Sierra Leone held general elections in 2018, the most closely contested in its political history with the opposition Sierra Leone People’s Party winning by 0.6% after a second vote. The new Government launched the Medium-Term National Development Plan (MTNDP - 2019-2023), which maps out immediate and long-term development goals and commitment to transform from a fragile state into a stable democracy. Tensed political rivalry especially between the ruling Sierra Leone People’s Party and the main opposition All People’s Congress continues to characterize the complex nature of politics and this sometimes results to violent confrontations. The setting up of the Commissions of Inquiry to investigate the governance activities of the past administration, the annulment by the High Court of the election of 10 opposition MPs in 2019, and the trial of some senior opposition members for various offenses, added to the political tension. A Peace and National Cohesion Conference was convened in May 2019 to help foster national unity, and Parliament in December 2020 passed into law the Independent Commission for Peace and National Cohesion. The Government recently repealed the draconian Part 5 of the Public Order Act of 1965 that criminalized libel, while the President has also signed into law the abolition of the death penalty.
Until the outbreak of Ebola in 2014, Sierra Leone was seeking to attain middle-income status by 2035, but the country still carries its post-conflict attributes of high youth unemployment, corruption, and weak governance. The country continues to face the daunting challenge of enhancing transparency in managing its natural resources and creating fiscal space for development. Problems of poor infrastructure and widespread rural and urban impoverishment persist despite remarkable strides and reforms.
Last Updated: Oct 27, 2021