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Sao Tome & Principe Country Risk Report 2017

Sao Tome & Principe Country Risk Report 2017

Core Views

The outlook for the São Tomé and Príncipe economy has been bolstered by the re-establishment of ties with China, which will see an increase in funding for infrastructure projects, decrease in the external debt burden and rise in tourist numbers. The outlook for traditional growth drivers, cocoa and tourism, is also upbeat.

The re-establishment of diplomatic and economic relations with China bodes well for the Sao Tome economy, given that it will lead to increased financial assistance. However, we also see scope that the new relationship will elevate political risk, given it could lead to increased corruption or to frustrations among the local populace about Chinese involvement in the economy.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Growth To Accelerate Following China Re-Engagement
The outlook for the São Tomé and Príncipe economy has been bolstered by the re-establishment of ties with China, which will see an
increase in funding for infrastructure projects, a decrease in the external debt burden and a rise in tourist numbers. The outlook for
traditional growth drivers, cocoa and tourism, is also relatively upbeat.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Tourism Growth & Concessional Lending Supports External Accounts
São Tomé and Principe will remain dependent on concessional financing to support its substantial current account shortfall over the
coming decade. Rising services exports related to the country's expanding tourism sector will support narrower shortfalls and a falling
external debt burden.
TABLE: TOP 5 GOODS EXPORTS (2015)
TABLE: TOP 5 GOODS IMPORTS (2015)
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
Currency Peg Supports Price Stability
Headline inflation in São Tomé and Principe will remain moderate over the coming decade, supported by the country's pegged
exchange rate with the euro. Temperate domestic demand and subdued commodity prices will further limit price pressures.
TABLE: MONETARY POLICY
Fiscal Policy And Public Debt Outlook
Expanding Revenue Base Will Support Fiscal Consolidation
São Tomé and Príncipe will pursue fiscal consolidation over the coming decade, narrowing its fiscal shortfalls by raising revenues and
limiting expenditure growth.
TABLE: FISCAL POLICY
Long-Term Economic Outlook
Tourism Will Drive Modest Growth
São Tomé and Príncipe will grow at a modest pace during the coming decade, with the economy to be supported by agriculture, tourism
and infrastructure investment. Although potential oil production poses upside risks to growth prospects, the island's reliance on the
economies of the European Union and exposure to climate change risks will weigh on growth.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 2: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
China Relations Good For Economy, But Potentially Bad For Political Risk
The re-establishment of diplomatic and economic relations with China bodes well for the Sao Tome economy, given it will lead to
increased financial assistance.
Contents
Long-Term Political Outlook
Persistent Power Transfers Will Undermine Policy Implementation
Political risks in São Tomé and Principe will remain modest over the coming decade as frequent changes in administration undermine
policy implementation. Although governing institutions remain relatively robust, supported by respect for individual rights and democratic
elections, corruption and intraparty tensions will remain elevated.
Chapter 3: Demographic Outlook
Demographic Outlook
TABLE: POPULATION BY AGE GROUP
TABLE: POPULATION BY AGE GROUP %
TABLE: POPULATION HEADLINE INDICATORS
TABLE: KEY POPULATION RATIOS
TABLE: URBAN/RURAL POPULATION & LIFE EXPECTANCY
Chapter 4: BMI Global Macro Outlook
Global Macro Outlook
EM Recovery To Drive Global Growth
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: SÃO TOMÉ AND PRÍNCIPE – MACROECONOMIC DATA & FORECASTS

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