2013 Index of Economic Freedom

São Tomé and Príncipe

overall score48.0
world rank153
Rule of Law

Property Rights20.0

Freedom From Corruption30.0

Limited Government

Government Spending45.3

Fiscal Freedom86.9

Regulatory Efficiency

Business Freedom53.5

Labor Freedom38.6

Monetary Freedom66.0

Open Markets

Trade Freedom60.0

Investment Freedom50.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.2 million
  • GDP (PPP):
    • $0.4 billion
    • 4.9% growth
    • 4.9% 5-year compound annual growth
    • $2,252 per capita
  • Unemployment:
  • Inflation (CPI):
    • 14.3%
  • FDI Inflow:
    • $18.0 million
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São Tomé and Príncipe’s economic freedom score is 48, making its economy the 153rd freest in the 2013 Index. Its score has decreased by 2.2 points from last year, reflecting substantial declines in half of the 10 economic freedoms including property rights, labor freedom, and trade freedom. São Tomé and Príncipe is ranked 37th 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 previous moves toward greater economic freedom have been sharply reversed in the 2013 Index. Recording the 10th largest score decline, the island economy has fallen back to the economic freedom status of “repressed.”

Undermining past years’ notable gains from enhancing regulatory efficiency, the weakened judicial system and lax protection for property rights are damaging prospects for long-term economic development. In addition, corruption remains rampant, and high government spending increases the fiscal burden. A lack of commitment to open-market policies holds back growth in trade and investment and thwarts the emergence of a more dynamic private sector.

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Background

São Tomé and Príncipe is a two-island republic in the Gulf of Guinea. President Fradique de Menezes, first elected in 2001, was re-elected in 2006. His election in December 2009 to lead the MDFM party as well was challenged within the party and by constitutional experts as unconstitutional. Legislative elections on August 1, 2010, were deemed free and fair by international observers. Plantation agriculture, particularly cocoa and coffee, dominates the economy. Cocoa accounts for about 95 percent of exports. Other export crops include copra (a coconut product) and palm kernels. Offshore oil fields shared with Nigeria are thought to hold billions of barrels of oil but have not been exploited. In April 2011, the country completed a Millennium Challenge Corporation Threshold Country Program designed to help increase tax compliance, reform customs, and improve the business environment.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 30.0 Create a Graph using this measurement

The legal system is weak, inefficient, and subject to persistent political influence. Property rights are not protected effectively. In 2012, the government expropriated land and later awarded it to an international agro-industrial firm. There is no separate commercial court, and backlogs of civil cases cause long delays. Corruption continues to be a concern. Bribery, embezzlement, and mismanagement of public funds are regarded as endemic.

Limited GovernmentView Methodology

The top income tax rate is 20 percent, and the corporate tax rate is a flat 25 percent. Other taxes include a sales tax and a dividend tax. The overall tax burden equals 17 percent of total domestic income. Government spending has increased to the equivalent of 42.7 percent of total domestic output. Deficits are chronically over 10 percent of GDP, and growing public debt exceeds 70 percent of GDP.

Regulatory EfficiencyView Methodology

The time needed to start a company has been reduced to only seven days, and licensing requirements have been simplified. However, licensing continues to require over three times the level of average annual income. In the absence of a well-functioning labor market, informal labor activity remains significant. Monetary stability is not well maintained, and government subsidies for food have increased.

Open MarketsView Methodology

The trade-weighted tariff rate is high at 15 percent, but there are relatively few non-tariff barriers to add to the cost of trade. The investment regime remains inefficient and lacks transparency. The underdeveloped financial sector 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
1Mauritius76.9-0.1
2Botswana70.61.0
3Rwanda64.1-0.8
4Cape Verde63.70.2
5Madagascar62-0.4
6South Africa61.8-0.9
7Ghana61.30.6
8Uganda61.1-0.8
9Namibia60.3-1.6
10Burkina Faso59.9-0.7
11The Gambia58.80.0
12Zambia58.70.4
13Tanzania57.90.9
14Gabon57.81.4
15Benin57.61.9
16Swaziland57.20.0
17Mali56.40.6
18Kenya55.9-1.6
19Senegal55.50.1
20Malawi55.3-1.1
21Nigeria55.1-1.2
22Mozambique 55-2.1
23Seychelles54.91.9
24Côte d'Ivoire 54.1-0.2
25Djibouti53.90.0
26Niger53.9-0.4
27Cameroon52.30.5
28Mauritania52.3-0.7
29Guinea51.20.4
30Guinea-Bissau51.11.0
31Central African Republic50.40.1
32Ethiopia49.4-2.6
33Liberia49.30.7
34Burundi490.9
35Togo48.80.5
36Sierra Leone48.3-0.8
37São Tomé and Príncipe 48-2.2
38Lesotho47.91.3
39Comoros47.51.8
40Angola47.30.6
41Chad45.20.4
42Republic of Congo 43.5-0.3
43Equatorial Guinea42.3-0.5
44Democratic Republic of Congo39.6-1.5
45Eritrea36.30.1
46Zimbabwe28.62.3
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