Economic Analysis
Sao Tome and Principe

Sao Tome and Principe

Population 0.2 million
GDP per capita 1,980 US$
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major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 2.7 2.7 -8.0 3.0
Inflation (yearly average, %) 8.2 8.3 7.8 8.0
Budget balance (% GDP)* -1.8 -1.3 -4.5 -4.0
Current account balance (% GDP)** -12.4 -12.4 -17.0 -11.7
Public debt (% GDP) 96.2 94.6 105.0 100.0

(e): Estimate (f): Forecast *Grants included **Including official transfers


  • Prospects for expansion of the tourism sector
  • Support from international donors
  • Strong ties to Portugal and Portuguese-speaking countries (Angola, Brazil)
  • Dobra pegged to the euro


  • Heavily dependent on international public aid
  • Low government revenue: 15% of GDP
  • Economy still dominated by agriculture and fishing
  • Poor business climate
  • Lack of infrastructure and weak legal and regulatory environment constrain the operating environment
  • High export and import costs due to remote island location
  • Underdeveloped and weak banking sector (non-performing loans exceed 25% of the portfolio)
  • High level of public debt


Economic growth facing a challenging recovery

Although São Tomé and Principe was not severely impacted health-wise by the COVID-19 pandemic, its economy took a major hit. However, economic growth is expected to make a timid return in 2021.

The tourism sector (6% of GDP in 2019), one of the archipelago’s main drivers of economic growth, collapsed in 2020 because of the mobility restrictions associated with the health crisis, such as border closures. A weak and gradual recovery is expected in 2021. In the long-term, foreign investment, particularly from Portugal and South Africa, should enable this sector to develop significantly. The country's economy is also dependent on agriculture (cocoa, coffee, pepper), which is an underperforming sector. For instance, cocoa, the most exported product, represents only 1.6% of GDP. After declining sharply in 2020, cocoa exports are expected to recover only slightly in 2021 due to the impact of supply chain disruptions, as well as reduced use of fertilizers and pesticides, which could hamper production.

To deal with the pandemic and support the economy, health and the most vulnerable households, the government announced a fiscal stimulus package in April 2020 worth 1.7% of GDP. The plan included, among other things, an increase in health spending (drugs, equipment, medical staff and treatment centres). Moreover, financial aid was allocated to small and medium enterprises, as well as to workers, including in the informal sector, and a moratorium was placed on interest payments. The central bank, meanwhile, cut its policy rate, lowered reserve requirements for local banks, reduced bank charges, and opened a line of credit to businesses. Domestic demand plummeted in 2020 due to the decline in household incomes. To reduce the impact of this on the population, with 67% of people living below the poverty line, and stimulate consumption, the government implemented aid for the poorest and most vulnerable members of society. As a result, domestic demand should grow in 2021. Similarly, investment contracted sharply in 2020 as investor confidence plunged, and the uncertainties associated with the end of the crisis pose a risk to a recovery in investment in 2021. In the short-term, public investment is expected to concentrate on the health sector, which is weak and a priority. In the long-term, the government will likely focus its policies on infrastructure development, with external support.


External aid and a halt to fiscal consolidation

Despite the reduction in the traditionally high trade deficit (18% of GDP in 2020 against 27% of GDP in 2019) and substantial foreign aid, the current account deficit widened considerably in 2020 because of the fall in tourism revenues. In 2021, the deficit is expected to narrow slightly with the pick-up in exports and a recovery - albeit limited - in tourism, which will offset increased imports due to the rebound in domestic demand. The deficit will continue to be financed by external assistance, mainly through grants.

The public deficit increased in 2020 due to the plan to support the economy, but is expected to stabilise in 2021. Public debt, which was already very high, rose in 2020, as external aid (while partly made up of grants) does not constitute the entire amount and is not enough to cover all of the additional financing, necessitating recourse to domestic debt. The fiscal consolidation called for by the IMF under its Extended Credit Facility, which was granted in October 2019 (USD 18 million over 40 months), has been put on hold until 2021. At the same time, international assistance has been substantial, with the IMF providing support amounting to just over USD 17 million, including USD 5 million under its Extended Credit Facility, USD 12 million under its Rapid Credit Facility, and USD 0.2 million in debt service relief. The country also received assistance from the European Union and the World Bank.


A well-established coalition

Since the October 2018 legislative elections, the coalition formed by the Movement for the Liberation of São Tomé and Principe - Social Democratic Party (MLSTP-PSD) and several smaller parties (PCD-UDD-MDFM) has been in power, despite the relative majority (25 seats out of 55) of the Independent Democratic Action (IDA) party, the main opposition party, which previously held an absolute majority. At the helm of the coalition, Jorge Bom Jesus succeeded Patrice Trovoada (IDA) as prime minister, leading to a power-sharing arrangement with President Evaristo Carvalho, who was elected in 2016 and is theoretically neutral, but who is a member of the IDA. Presidential elections will take place in October 2021, and the MLSTP-PSD candidate, after his skilful handling of the crisis, is well positioned to win, which would allow peaceful power-sharing to be restored. Externally, cooperation will remain crucial for the archipelago. Relations with Portuguese-speaking countries (Portugal, Angola, Brazil) and international organisations remain very important. Since recognising the One China policy at Taiwan’s expense in 2016, São Tomé and Principe has strengthened its relations with China, as illustrated by the increase in funding granted to the archipelago.


Last updated: February 2021

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