2014 Index of Economic Freedom

São Tomé and Príncipe

overall score48.8
world rank157
Rule of Law

Property Rights20.0

Freedom From Corruption32.5

Limited Government

Government Spending27.9

Fiscal Freedom86.9

Regulatory Efficiency

Business Freedom52.6

Labor Freedom44.7

Monetary Freedom68.3

Open Markets

Trade Freedom75.3

Investment Freedom50.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.2 million
  • GDP (PPP):
    • $0.4 billion
    • 4.0% growth
    • 5.3% 5-year compound annual growth
    • $2,337 per capita
  • Unemployment:
    • 14.2%
  • Inflation (CPI):
    • 10.6%
  • FDI Inflow:
    • $49.5 million
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São Tomé and Príncipe’s economic freedom score is 48.8, making its economy the 157th freest in the 2014 Index. Its score has increased by 0.8 point from last year, with improvements in freedom from corruption, labor freedom, monetary freedom, and trade freedom largely offset by a significant deterioration in the control of government spending. São Tomé and Príncipe is ranked 38th out of 46 countries in the Sub-Saharan Africa region, and its score is below the world and regional averages.

São Tomé and Príncipe’s economic freedom was first assessed in the 2009 Index, and its score has advanced since then by 5 points. Notable score improvements have occurred in seven of the 10 economic freedoms, with significant gains in trade freedom, fiscal freedom, and investment freedom. These improvements have been partially offset by a decline in property rights.

The island economy has fallen back to the rank of economically “repressed” in recent years. The poor judicial system and lax protection of property rights are damaging prospects for much-needed sustainable economic development and have undermined past years’ gains in regulatory efficiency.

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Background

President Manual Pinto da Costa, who served as president for 15 years following independence from Portugal in 1975, returned to office in 2011. Under São Tomé and Príncipe’s democratic constitution, the president shares power with a prime minister who requires the confidence of the parliament to retain power. Prime Minister Gabriel Costa, who took office in 2012, is regarded as a consensus builder who may be able to bring stability to an office that has seen 15 incumbents since 1990. Agriculture, particularly cocoa and coffee, dominates the economy, with cocoa accounting for about 95 percent of exports. The government has been encouraging economic diversification and hopes to exploit the billions of barrels of oil that are thought to lie off the coast.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 32.5 Create a Graph using this measurement

Development aid and potential oil wealth have fueled corruption among the ruling elite. Bribery, embezzlement, and mismanagement of public funds are regarded as endemic. The judiciary is independent but weak, underfunded, understaffed, inefficient, and susceptible to persistent political influence. There is no separate commercial court, and backlogs of civil cases cause long delays. Property rights are not protected effectively.

Limited GovernmentView Methodology

The top individual income tax rate is 20 percent, and the top corporate tax rate is 25 percent. Other taxes include a sales tax and a dividend tax. The overall tax burden equals 16.8 percent of total domestic income. Government spending is equal to about half of the size of the domestic economy. Public debt is equal to 75 percent of GDP. The approval of a Public Debt Management Law may help to establish positive fiscal policies.

Regulatory EfficiencyView Methodology

Incorporating a company takes less than a week, and no minimum capital is required. However, completing licensing requirements still costs about four times the level of average annual income. In the absence of a well-functioning labor market, informal labor activity remains significant. The government says it wants to cut fuel and power subsidies and fix problems in the state-owned water and electricity firm, but progress is very slow.

Open MarketsView Methodology

São Tomé and Principe’s average tariff rate was 7.4 percent as of 2008. Pork imports are not allowed. Foreign investment is generally treated the same as domestic investment under the law, and most sectors of the economy are open to investment. The underdeveloped financial sector, dominated by banks, does not provide adequate access to banking services for a large portion of the population.

Country's Score Over Time

Bar Graph of São Tomé and Príncipe  Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing São Tomé and Príncipe  to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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