Headline inflation is projected to decelerate to an average of 2.5% in 2025, thanks to easing energy prices. As a result, extreme poverty incidence (<$3.00/day, 2021 PPP) is expected to decline to 41.2% in 2025. Higher cashew production, along with favorable cashew exports price projections, & lower oil and food import prices, will support the narrowing of the current account deficit to 6.1% of GDP in 2025, down from 8.6% in 2024. The fiscal deficit is projected to narrow to 4.9% of GDP in 2025 supported by higher cashew revenue, and lower current expenditures. Public debt is expected to decline to 78.5% of GDP in 2025.
Growth is expected to average 5.2% in 2026-2027. Agriculture is projected to remain a driver of growth, supported by recent government investments that will enhance rural incomes and stimulate private consumption. The construction & service sectors, alongside improved electricity supply & investments in roads & connectivity infrastructure, are expected to strengthen regional integration and attract private investment. Higher per capita growth and lower food prices are anticipated to reduce poverty to 37.2% in 2027. Improved revenue collection & continued spending discipline could reduce the fiscal deficit and public debt to 3.0% and 74% of GDP, respectively, by 2027.
Despite recent progress, risks to the outlook remain elevated. Economic growth could be dampened by weak performance in the cashew sector, international shocks to commodity markets, political instability and uncertainty surrounding the elections scheduled for November 2025, & potential fiscal slippage.
