2020 Index of Economic Freedom

São Tomé and Príncipe

OVERALL SCORE56.2
WORLD RANK125
Rule of Law

Property Rights41.0

Judicial Effectiveness26.5

Government Integrity37.4

Government Size

Tax Burden88.3

Government Spending77.1

Fiscal Health73.0

Regulatory Efficiency

Business Freedom64.8

Labor Freedom43.4

Monetary Freedom68.1

Open Markets

Trade Freedom64.2

Investment Freedom60.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.2 million
  • GDP (PPP):
    • $0.7 billion
    • 3.0% growth
    • 4.3% 5-year compound annual growth
    • $3,324 per capita
  • Unemployment:
    • 13.3%
  • Inflation (CPI):
    • 7.9%
  • FDI Inflow:
    • $17.5 million

São Tomé and Príncipe’s economic freedom score is 56.2, making its economy the 125th freest in the 2020 Index. Its overall score has increased by 2.2 points due primarily to higher fiscal health and government spending scores. São Tomé and Príncipe is ranked 19th among 47 countries in the Sub-Saharan Africa region, and its overall score is approximately equal to the regional average and well below the world average.

The economy of São Tomé and Príncipe has been mostly unfree since 2015. GDP growth, however, has been solid for the past five years.

The government is under pressure from international lenders to institute economic and structural reforms aimed at fiscal consolidation and debt reduction. In 2019, in an effort to strengthen the judiciary’s independence, the National Assembly removed three senior judges on numerous misconduct charges. If the government continues such reform efforts, economic freedom in São Tomé and Príncipe is bound to improve.

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Background

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 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.

Rule of LawView Methodology

Property Rights 41.0 Create a Graph using this measurement

Judicial Effectiveness 26.5 Create a Graph using this measurement

Government Integrity 37.4 Create a Graph using this measurement

Property rights are not well protected. The government owns the vast majority of land; private owners hold less than 10 percent. The judiciary is independent but weak and frequently caught in the middle of partisan political battles. Corruption is a major problem. Oversight mechanisms, the opposition, and the media have repeatedly uncovered evidence of official malfeasance, but the anticorruption laws are poorly enforced.

Government SizeView Methodology

The top personal 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 12.1 percent of total domestic income. Government spending has amounted to 27.6 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 2.9 percent of GDP. Public debt is equivalent to 81.3 percent of GDP.

Regulatory EfficiencyView Methodology

The government is taking steps such as simplifying and reducing court fees related to enforcing contracts that are meant to improve the business environment, but the justice system remains slow, and obtaining credit is expensive. Existing labor laws are enforced only sporadically. Fuel subsidies to lower consumer prices continue to burden the government, and the IMF suggests eliminating them in order to pursue economic reforms.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals about 55 percent of GDP. The average applied tariff rate is 10.4 percent. Nontariff barriers are numerous, and accession to the World Trade Organization has moved slowly since the country’s application in 2005. The inefficient investment regime lacks transparency. The underdeveloped financial sector does not provide adequate access to banking services.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius74.91.9
2Rwanda70.9-0.2
3Botswana69.60.1
4Seychelles64.32.9
5Cabo Verde63.60.5
6Tanzania61.71.5
7Namibia60.92.2
8Madagascar60.53.9
9Côte d'Ivoire 59.7-2.7
10Uganda59.5-0.2
11Ghana59.41.9
12South Africa58.80.5
13Senegal581.7
14Nigeria57.2-0.1
15Burkina Faso56.7-2.7
16Gabon56.70.4
17Guinea56.50.8
18The Gambia56.33.9
19São Tomé and Príncipe 56.22.2
20Mali55.9-2.2
21Mauritania55.3-0.4
22Eswatini55.30.6
23Kenya55.30.2
24Benin55.2-0.1
25Niger54.73.1
26Lesotho54.51.4
27Togo54.13.8
28Comoros53.7-1.7
29Cameroon53.61.2
30Ethiopia53.60.0
31Zambia53.5-0.1
32Guinea-Bissau53.3-0.7
33Djibouti52.95.8
34Malawi52.81.4
35Angola52.21.6
36Central African Republic50.71.6
37Mozambique 50.51.9
38Chad50.20.3
39Democratic Republic of Congo49.5-0.8
40Liberia49-0.7
41Burundi490.1
42Equatorial Guinea48.37.3
43Sierra Leone480.5
44Sudan45-2.7
45Zimbabwe43.12.7
46Republic of Congo 41.82.1
47Eritrea38.5-0.4
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