- GDP (PPP):
- $0.7 billion
- 1.3% growth
- 3.2% 5-year compound annual growth
- $4,128 per capita
- Inflation (CPI):
- FDI Inflow:
São Tomé and Príncipe’s economic freedom score is 55.9, making its economy the 129th freest in the 2021 Index. Its overall score has decreased by 0.3 point, primarily because of a decline in property rights. São Tomé and Príncipe is ranked 24th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.
The economy of São Tomé and Príncipe has been mostly unfree since 2015. To achieve greater economic freedom, the government would have to undertake comprehensive reforms in rule-of-law institutions, ensure full implementation of the new labor code to create more labor freedom, strengthen property rights, improve the judicial system, and reduce corruption.
IMPACT OF COVID-19: As of December 1, 2020, 17 deaths had been attributed to the pandemic in São Tomé and Príncipe, and the economy was forecast to contract by 6.5 percent for the year.
This former Portuguese colony’s sugar-based economy gave way to coffee and cocoa in the 19th century. Independence was achieved in 1975, but democratic reforms were not instituted until the late 1980s. Evaristo Carvalho won the presidency in 2016 in a runoff election that was marred by accusations of irregularities and a boycott by incumbent President Manuel Pinto da Costa. Jorge Bom Jesus became prime minister following his predecessor’s resignation at the end of 2018. Cocoa production, an economic mainstay, has declined in recent years because of drought and mismanagement, but there is potential for tourism. The country is seeking to develop oil fields in the Gulf of Guinea jointly with Nigeria, but whether the project will prove commercially viable is unclear.
Property rights are not well protected. The government owns the vast majority of land; less than 10 percent of it is held by private owners. The judiciary is independent but weak and susceptible to political influence. Although there are criminal penalties for official corruption, the government reportedly does not enforce those laws effectively, and many citizens believe that many public officials are corrupt.
The top individual income tax rate is 20 percent, and the corporate tax rate is a flat 25 percent. Other taxes include sales and dividend taxes. The overall tax burden equals 11.6 percent of total domestic income. Government spending has amounted to 26.0 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 95.7 percent of GDP.
The costs involved in starting a business have risen, and São Tomé and Príncipe’s business freedom score is the lowest since 2014. Labor laws have generally not been enforced, but a modern labor code enacted in April 2019 is intended to change that. The government is still struggling to phase out the unsustainable fuel subsidies that have caused much of the country’s debt burden.
São Tomé and Príncipe has no preferential trade agreements in force. The trade-weighted average tariff rate is 9.9 percent. São Tomé and Príncipe is not a member of the World Trade Organization. Layers of nontariff barriers constrain the freedom to trade. Investment laws are outmoded, and bureaucracy is slow and inefficient. Banking dominates the underdeveloped financial sector, and access to credit, particularly long-term credit, remains very limited.