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Select Economic and Financial Indicators 2014 2015 2016 2017e 2018f
Real GDP (% change) 1.0 5.1 5.1 5.0 5.0
GDP (USD bn) 1.1 1.0 1.2 1.3 1.4
Inflation (average) -1.0 1.5 1.5 0.8 2.0
Fiscal Balance (% GDP) -2.6 -3.0 -4.8 -1.9 -2.1
Broad Money (% change, end period) 21.1 25.4 7.7 14.3 10.3
Population (mn) 1.7 1.8 1.8 1.9 1.9
Exports (USD bn) 0.2 0.3 0.3 0.4 0.4
Imports (USD bn) 0.3 0.3 0.4 0.4 0.5
Current Account Balance (% GDP) 0.6 2.0 0.9 0.1 -0.6
FX Reserves (USD bn, end period) 0.3 0.3 0.3 0.4 0.4
Exchange Rate (average) 496.1 594.3 600.7 588.9 565.1
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic outlook

Economic outlook

Real GDP: Growth prospects in 2018 will remain fragile given ongoing political tensions following the protracted political and institutional crisis in the country since the coup in 2012. However, the recent adoption of a six-point roadmap for an inclusive government and constitutional reform has reduced political uncertainties, subsequently renewing donor support in the country. This has helped to kickstart the government’s 2016-18 development strategy supported by the IMF’s Extended Credit Facility approved in July 2015. The development strategy aims to strengthen expenditure controls through effective public financial management and tax administration, and the implementation of structural reforms in a bid to improve the business environment and support medium-term growth. While the inability of political stakeholders to reach a lasting peaceful resolution will continue to undermine the country’s growth potential, the development initiatives, including agricultural reforms, sustained cashew production and ongoing public investment and construction activity should support growth of around 5.0% in 2018 (barring further major political shocks and assuming clement weather conditions). Without significant improvements to stability and security, economic growth is unlikely to expand above our projected level.

Inflation: is projected to rise on the back of improved oil prices and ongoing cost-push factors resulting from supply bottlenecks and lower investment levels caused by political concerns. However, our expectation of a strengthening EUR bias in 2018 (and hence the XOF given the pegged exchange rate) will help to limit the impact. Overall, we expect inflation to remain below the Union Economique et Monétaire Ouest-Africaine (UEMOA) convergence criterion of 3%.

Fiscal balance: Fiscal pressures are likely to rise in line with growing developmental needs and implementation delays; nonetheless, we expect the budget deficit to remain below the union’s 3.0% criteria, supported by improved donor support and reforms aimed to strengthen public financial management and improve tax revenue collection. Further progress will be made assuming that tax compliance is strengthened, and that there is no recourse to domestic financing. Given limited revenue prospects (particularly before the start of the cashew season) strict spending controls and prudent cash management will be required to minimise any further accumulation of arrears.

Current account: Although sustained cashew production and fiscal prudence should provide some support from the current account, such gains will be offset by higher oil prices, which will increase import costs undermining the current account position. This will be exacerbated by ongoing capital imports geared towards the government’s infrastructure projects; specifically, the construction of power distribution lines to reduce the chronic energy shortage, and the expansion of the country’s road network. Consequently, we expect the current account to post a deficit in 2018, increasing financing risk.

Risks

There are several main risks facing Guinea-Bissau. The fragile political situation is the largest concern – a return to instability via another coup would set back the economy enormously. Delays to the reform programme could be also be encountered if political willingness is weak. In turn, this could prompt much-needed donor inflows to be suspended or cancelled. Finally, a terms of trade shock or resurgence of Ebola in neighbouring countries would disrupt economic activity severely.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange Rate Structure

Regime Fixed
Target XOF655.957 to EUR1
Type of intervention Via Central Bank
Convertible currency? Partial
Market participants Corporates (18%); Financial Institutions/International Orgs. (42%); Domestic Orgs. (39%); Business Development Corporations (1%)
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FX

FX Products Spot Forwards Non-deliverable Forwards Options Swaps
On offer Yes No No No No
Daily trading volume (USD mn) n/a n/a
Average trade size (USD mn)
Average spread
Trading hours 07:30-16:30
Settlement cycle T+2
FX Market Structure BCEAO’s exchange regime is free of restrictions on payments and transfers for current international transactions, apart from restrictions maintaned for security.
Non-resident FX Regulations Spot Forwards Non-deliverable Forwards Options Swaps
Trade and FDI flow No restrictions n/a
Financial flow
Resident FX Regulations Spot Forwards Non-deliverable Forwards Options Swaps
Trade and FDI flow No restrictions n/a
Financial flow
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FI

FX Products Spot Forwards Non-deliverable Forwards Options Swaps
On offer Yes No No No No
Daily trading volume (USD mn) n/a n/a
Average trade size (USD mn)
Average spread
Trading hours 07:30-16:30
Settlement cycle T+2
FX Market Structure BCEAO’s exchange regime is free of restrictions on payments and transfers for current international transactions, apart from restrictions maintaned for security.
Non-resident FX Regulations Spot Forwards Non-deliverable Forwards Options Swaps
Trade and FDI flow No restrictions n/a
Financial flow
Resident FX Regulations Spot Forwards Non-deliverable Forwards Options Swaps
Trade and FDI flow No restrictions n/a
Financial flow
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FI primary market information

FI primary market information

Guinea-Bissau Debt 2014 2015 2016 2017e 2018f
Government debt (% GDP) 53.3 46.8 46.3 44.5 43.1
Sub-Sahara average 44.3 51.5 54.7 54.8 54.8
External debt (official creditors, % GDP) 22.8 22.0 20.4 21.4 22.0
Sub-Sahara average 25.4 29.5 31.3 33.0 33.4
External public debt stock (USD bn) 0.2 0.2 0.2 0.2 0.3
Share of total sub-Sahara debt (%) 0.1 0.1 0.1 0.1 0.1
Source: IMF; Ecobank Research

Commodity and trade information

Commodity and trade information

Hydrocarbon & mineral production

Guinea-Bissau has large reserves of minerals, few of which have been exploited owing to the country’s endemic political instability. Canada’s GB Minerals is investing US$200mn to develop the Farim phosphate deposit, which has estimated reserves of over 100mn tonnes. The company is carrying out testing and feasibility studies for the port logistics and has not yet set a date for first production. The country’s other key mining project is Bauxite Angola, a joint venture with the Angolan government which planned to invest US$500m in developing the Madina Boe bauxite deposit, with associated rail and port infrastructure. However, following the collapse in oil prices in mid-2014 and the return of political instability to Guinea-Bissau, the project has gone dormant.

Guinea-Bissau does not currently produce oil or gas, but there have been several non-commercial offshore oil discoveries. The first commercial discovery was the Sinapa-1 well in 2004, which found an estimated 41mn barrels of oil. Norwegian oil company, Svenska, and Australian independent, FAR Oil & Gas, plan to start appraisal drilling in 2018. Guinea-Bissau consumed 82,000 tonnes of petroleum products in 2016, a 5% increase on 2015. The country imports almost all of its petroleum products from Senegal.

Soft commodity production

Guinea Bissau is Africa’s third largest producer of cashew nuts, with estimated output of 200,000 tonnes of raw cashew nuts (RCN) in 2017, around 8% of world production. In May 2017 the government proposed measures to restrict foreign traders (notably from Mauritania, China and India) from buying cashews directly from growers in an effort to boost local traders. However, these measures were not implemented after widespread criticism. A large proportion of Guinea-Bissau’s RCN output is smuggled to neighbouring markets, notably Senegal, where cashews can command higher prices. Guinea-Bissau has no other significant agricultural production, apart from staple food crops for domestic consumption.

Trade flows

Imports

Guinea Bissau’s imports totalled US$353mn in 2016, 19% higher than the previous year. Given the country’s limited natural resources, Guinea-Bissau is dependent on imports of food & beverages and petroleum products, worth US$103mn and US$35.6mn in 2016, respectively. The country is also reliant on imports of electronics, machinery, vehicles and iron & steel (worth a total of US$73mn in 2016), owing to the weakly developed manufacturing sector.

Exports

Guinea Bissau’s exports totalled US$279mn in 2016, 2.3% lower than the previous year. Raw cashew nuts (RCN) remain Guinea-Bissau’s most valuable commodity export, worth US$212mn in 2016, 76% of its total foreign exchange earnings. The majority of RCN exports go to India, Singapore and Vietnam for processing. Guinea Bissau also exported US$17mn of frozen fish in 2016, mostly to Senegal. Together, cashew nuts and frozen fish constitute 82% of Guinea-Bissau’s exports.

  • Flag
  • Population
    1,907,268
  • Area
    36,125 km2
  • Capital
    Bissau
  • Largest city
    Bissau
  • Official language
    Portuguese
  • Major languages
    Upper Guinea Creole
  • Currency
    West African CFA Franc (XOF)

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