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Quick Facts
- Population:
- GDP (PPP):
- $3.4 billion
- 4.4% growth
- 3.6% 5-year compound annual growth
- $1,667 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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The Gambia’s economic freedom score is 52.3, making its economy the 145th freest in the 2018 Index. Its overall score has decreased by 1.1 points, with lower scores for the property rights, fiscal health, and tax burden indicators overwhelming an improvement in business freedom. The Gambia is ranked 28th among 47 countries in the Sub-Saharan Africa region, and its overall score is below the regional and world averages.
Facing a dire economic situation, the new government wants to use tax breaks and other investment incentives in the energy and infrastructure construction sectors to rebuild investor confidence after decades of economic mismanagement. The market for groundnuts, Gambia’s main export, will also be deregulated. Pervasive corruption is a critical problem. Weak protection of property rights has undermined the rule of law. State-owned enterprises are present in many sectors, and supporting them is a major cause of the government’s debt.
Background
Geographically surrounded by Senegal, Gambia gained independence from the U.K. in 1965. Long-time dictator Yahya Jammeh took power in 1994 and won a fourth term in 2011 in flawed elections. Adama Barrow defeated Jammeh in the December 2016 presidential elections. After Jammeh refused to step down, Economic Community of West African States (ECOWAS) member countries intervened militarily in January 2017 and forced Jammeh to leave the country. In June 2017, ECOWAS extended the mandate of its approximately 500 troops remaining in Gambia for another year. The new government is courting Chinese investment and has signed a duty-free trade agreement with China. Revenue depends heavily on peanut exports, leaving the government vulnerable to price fluctuations and market shocks.
Inadequate contract enforcement and inadequate protection of property rights are further weakened by multiple overlapping land tenure systems. Many properties are subject to expropriation by the government. Although constitutionally independent, the judiciary often defers to the executive branch. The judicial system recognizes customary law and Sharia (Islamic) law. Official corruption and impunity are serious problems.
The top personal income tax rate is 35 percent, and the top corporate tax rate is 32 percent. Other taxes include capital gains and sales taxes. The overall tax burden equals 23.7 percent of total domestic income. Over the past three years, government spending has amounted to 29.4 percent of total output (GDP), and budget deficits have averaged 8.2 percent of GDP. Public debt is equivalent to 116.1 percent of GDP.
A lack of transparency in government procedures and the siphoning of profits from successful companies negatively affected the business environment throughout the former president’s 22-year autocratic reign. Unemployment and underemployment are high. Subsidies to the state-owned water and electricity utilities and other public enterprises are a chronic contributor to a high fiscal deficit that exceeded 10 percent of GDP in 2017.
Trade is significant for Gambia’s economy; the combined value of exports and imports equals 66 percent of GDP. The average applied tariff rate is 12.7 percent. Nontariff barriers impede some trade. In general, government policies do not significantly deter foreign investment. The financial sector is gradually expanding. Almost all commercial banks are majority-owned by foreign banks, and credit to the private sector has been rising.