Macroeconomic Performance
Table 1: Overview of some macroeconomic indicators
Guinea-Bissau’s economy grew by 4.2 per cent in 2023, the same as in 2022, with the agriculture sector and industry sector (particularly public sector construction) driving the growth in economic activity. The country experienced weak cashew exports. However, there was a marginal improvement of the current account balance from -9.5 per cent of GDP in 2022 to -9.4 per cent in 2023. Average inflation declined to 7.2 per cent, still considered extremely high in the WAEMU zone, from 7.9 per cent in 2022. A 12.8 per cent growth in expenditure, compared to a 1.8 per cent growth in revenue, contributed to a widening of the fiscal balance to -7.6 per cent of GDP in 2023, compared to -6.1 per cent in 2022. The debt-to-GDP ratio declined to 77.8 per cent in 2023 from 80.4 per cent in 2022.
Outlook
The growth in economic activity is projected to rebound to 4.9 per cent in 2024, increasing marginally to 5.0 per cent in 2025, while inflation eases to 4.3 per cent and 3.2 per cent in 2024 and 2025, respectively. Falling inflation will support the growth in economic activity through strong private sector demand. Fiscal balance is expected to improve to -3.8 per cent of GDP in 2024 and further to -3.0 per cent in 2025, with the debt-to-GDP ratio declining to 76.5 per cent of GDP and 74.0 per cent in 2024 and 2025, respectively. Likewise, the current account balance is projected to improve to -7.3 per cent of GDP in 2024 and -6.0 per cent in 2025. This is on the back of steps taken to boost cashew exports, including the opening of additional land borders to facilitate exports, reducing smuggling in the process.
Probable Headwinds
Guinea-Bissau suffered from weak cashew demand in 2023, leading to low export receipts. A repeat of this episode in 2024 will worsen the current account balance and demoralise farmers, who already suffer under the effects of climate change. The country has a history of political instability. In effect, there is a constant threat that needs to be contained. Increasing international prices of crude oil could feed into the economy and derail fiscal consolidation efforts, while putting an upward pressure on prices.