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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)4.14.04.14.05.0
GDP (USD bn)0.30.30.40.40.4
Inflation (average)7.05.35.45.55.5
Fiscal Balance (% GDP)-5.3-6.3-2.7-4.9-2.4
Broad Money (% change, end period)11.413.412.010.09.0
Population (mn)0.20.20.20.20.2
Exports (USD bn)0.10.10.10.10.1
Imports (USD bn)0.20.20.20.20.2
Current Account Balance (% GDP)-21.9-13.0-6.2-12.2-9.9
FX Reserves (USD bn, end period)0.080.070.060.070.07
Exchange Rate* (average)18222221,82820.564
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic outlook

Economic outlook

Real GDP: The 2018 economic outlook is positive. Growth is forecast accelerate to around 5.0%, from 4.0% in 2017, driven largely by tourism, food processing, construction and expansion in agricultural output. Growth in 2017 missed forecasts as prices for cocoa (accounting for over 80% of São Toméan goods exports) fell more than 30% amid a global supply glut; an expected rebound in prices in 2018 should help to deliver stronger growth in the agricultural sector. External financing for private and public sector investment projects (including an extension of the country’s airport) will also help to boost economic expansion; a World Bank disbursement of USD5mn (1.3% of GDP) originally planned for 2017 has been delayed until 2018, along with the expected boost that it will provide to economic activity. With the adoption of a fixed exchange rate regime in 2010, fiscal policy has become the authorities’ principal instrument for achieving sustainable macroeconomic balances.

Inflation: is likely to slow to remain around 5.5% in 2018, as rising global commodity prices and election-related spending maintain domestic price pressures. However, the potential for accelerating inflation will likely be contained, as the domestic price level remains anchored by the Sao Tomé dobra (STD) peg to the EUR, for which we expect a strengthening bias in 2018.

Fiscal balance: This fiscal deficit is expected to narrow in 2018, after weakening to around 5% of GDP last year, from 2.7% of GDP in 2016. The deterioration in 2017 resulted from revenue shortfalls (amid a sharp price decline for São Tomé’s main export, cocoa, and tax collection shortfalls) and expenditure overruns. Fiscal consolidation efforts (improved tax and customs administration and rationalisation of expenditures), alongside improved cocoa receipts and higher oil import duties (amid rising crude prices) are expected to help tighten the deficit to within 3% of GDP this year. However, government endeavours to clear large domestic debt arrears (13% of GDP), including those owed to the national oil distributor ENCO (more than 80% owned by Angola’s Sonangol), and the state-owned utilities provider, will maintain fiscal pressure.

Current account: Without significant oil exports from the Joint Development Zone (shared with Nigeria), São Tomé and Príncipe’s large current account deficit will be expected remain wide at nearly 10% of GDP in 2018. Although, this constitutes an improvement compared to the 12.2% of GDP deficit estimated in 2017. This narrowing will be supported by increased tourism and improved agricultural output, as well as recovery in cocoa prices from last year’s supply glut. A narrow export base and high import dependency make the country vulnerable to external shocks (such as an oil price boom).

Risks

Include delayed or partial implementation of IMF-advised policies, financial sector vulnerabilities, and continued subdued growth in Europe (albeit improving) that the economy is particularly exposed to. Looking further ahead, São Tomé and Príncipe’s economic development is constrained by its insularity, fragility, limited resources, and low capacity as a small island state. Therefore, the authorities need to address the high debt vulnerability while also creating the conditions for sustained growth, which requires reforms to strengthen domestic revenue mobilization, expenditure rationalization, public debt management, and public financial management to restore fiscal discipline and reduce the risk of debt distress. Moreover, there needs to be a strategy developed to eliminate the stock of arrears and also prevent the accumulation of new arrears. Finally, the business environment needs to be strengthened to boost growth.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange Rate Structure

RegimeFixed
Target24.50 STN to the EUR
Type of interventionVia central bank (Banco Central São Tomé and Principe)
Convertible currency?Yes
Market participantsBCSTP and Commercial banks
Source: Bloomberg, IMF, and Ecobank Research

FX

FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesNoNoNoNo
Daily trading volume (USD mn)n/an/a
Average trade size (USD mn)n/a
Average spreadn/a
Trading hoursLimited
Settlement cycleT+2
FX Market StructureCommercial banks can buy FX from the BCSTP at to 1.5% and earn a 0.5% commission on FX from BCSTP purchases. Any FX commission which banks decide to charge cannot exceed 2% for transactions in EUR, and 4% for transactions in any other currency.
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowTaxes and other obligations to gov’t must be paid as a condition of of the transfer of net income from investmentn/a
Financial flow
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNo restrictionsn/a
Financial flow
Source: Bloomberg, IMF, and Ecobank Research

FI

Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
IssuerGovernmentn/a
End useDeficit financing
Maturity structure6months
CouponZero
Coupon paymentsn/a
Secondary Market 
Daily trading volumeLimited trading
Average trade size
Settlement cycle
Ecobank local affiliate contact details:
Ecobank São Tomé and Príncipe, Edifício HB, Travessa do Pelourinho, São Tomé
Tel: +239 222 21 41/55 60
Source: Bloomberg, IMF, and Ecobank Research

FI Primary Market information

FI Primary Market information

São Tomé and Príncipe Debt2014201520162017e2018f
Government debt (% GDP)69.686.094.087.583.6
    Sub-Sahara average44.552.656.155.655.8
External debt (official creditors, % GDP)69.686.079.674.271.7
    Sub-Sahara average25.530.231.932.933.2
External public debt stock (USD bn)0.20.30.30.30.3
    Share of total sub-Sahara debt (%)0.10.10.10.10.1
Source: IMF; Ecobank Research

Commodity and Trade Information

Commodity and Trade Information

Hydrocarbon & mineral production

São Tomé & Príncipe is believed to hold reserves of up to 2 billion barrels of oil in its deepwater offshore region, owing to its location between the intersecting Niger Delta and Douala Basin plays in Nigeria and Cameroon, respectively. Although the country was the focus of considerable exploration activity, following a string of dry wells by Total and a non-commercial gas find by Chevron, exploration activity has slowed considerably. To date there have been no commercial discoveries or any production of oil. São Tomé & Príncipe consumed around 50,000 tonnes of petroleum products in 2016, all of which were imported from neighbouring countries.

The country has no known hard mineral reserves.

Soft commodity production

As a small archipelago, São Tomé & Príncipe lacks a robust agricultural sector. Aside from food crops for domestic consumption, the country’s only notable soft commodity production is cocoa, with estimated output of 3,000 tonnes in 2016/17.

Trade flows

Imports

São Tomé & Príncipe’s imports totalled US$139mn in 2016. The archipelago is reliant on imports of petroleum products, worth US$22mn in 2016. The archipelago also imported vehicles, machinery and electronics worth US$33mn, reflecting the lack of local manufacturing. São Tomé & Príncipe is dependent on imports of industrial raw materials, such as iron, steel and cement (together worth US$7mn in 2016) and of food & beverages (US$30mn).

Exports

São Tomé & Príncipe’s exports totalled just US$10.5mn in 2016, reflecting the absence of a major export sector. The country’s only notable commodity export is cocoa, of which it exported US$8.8mn worth in 2016, 84% of total exports. The country also exports small quantities of cashew nuts and peppers, as well as re-exports of consumer goods (such as electronics) to the sub-region.

  • Flag
  • Population
    208,818
  • Area
    964
  • Capital
    São Tomé
  • Largest city
    São Tomé
  • Official language
    Portuguese
  • Major languages
    Forro, Angolar, Principense
  • Currency
    São Tomé and Príncipe Dobra

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