Guinea-Bissau Economy

Guinea-Bissau is one of the poorest countries in the world. In 2010 it’s GDP (PPP) was US$1.793 billion, and nominal GDP (current prices, US dollars)  was US$0.825 billion.

A former Portuguese colony located on the Western African shore of the Atlantic Ocean and bordered by Senegal and Guinea, Guinea-Bissau faced problems such as an untrained public administration, a highly fragmented social structure and an extremely unstable political system when it declared its independence in 1974.

Guinea-Bissau is one of the poorest countries in the world. In 2010 it’s GDP (PPP) was US$1.793 billion, and nominal GDP (current prices, US dollars)  was US$0.825 billion.

A former Portuguese colony located on the Western African shore of the Atlantic Ocean and bordered by Senegal and Guinea, Guinea-Bissau faced problems such as an untrained public administration, a highly fragmented social structure and an extremely unstable political system when it declared its independence in 1974.

Since then, Guinea-Bissau has been plagued by social and political instability that has caused a lull in economic activity. The country’s economy relies almost exclusively on its agriculture sector as well as any foreign assistance it can get.

Guinea-Bissau’s Cashew Nut Industry

Guinea-Bassau possesses fertile, arable land as well as an ideal climate suitable for growing a large variety of crops, cashew nut production dominates Guinea-Bissau’s agriculture sector. As the sixth largest producer of cashew nuts in the world, the industry represents 20 percent of Guinea-Bissau’s total GDP as well as 85 percent of all jobs in the country.

Yet despite being a vital part of Guinea-Bissau’s economy, the industry is extremely underdeveloped. According to the African Economic Outlook, cashew nut production in Guinea-Bissau could easily be tripled or quadrupled with the implementation of modern technology and infrastructure. The lack of cashew nut processing facilities in the country has also caused their cashew nuts to be sold well below international market prices.

Despite producing an estimate of over 140,000 tonnes of cashew nuts in 2009, the lack of a formal institution to regulate the industry resulted in a significant quantity of cashew nuts that were smuggled across and re-exported by its neighbours.

Guinea-Bissau’s Industry Sectors

These problems have also manifested in the rest of Guinea-Bissau’s agriculture sector as well as the other industry sectors. Guinea-Bissau’s agriculture sector made up 62 percent of Guinea-Bissau’s GDP in 2008; services and industrial sectors contributed 23 percent and 15 percent respectively.

However much of Guinea-Bissau’s economy remains unaccounted for. According to the African Economic Outlook, Guinea-Bissau’s informal sector is the main source of income within the capital of Bissau, with only 75 firms registered in the entire country.

Illegal drug trafficking is also rampant in Guinea-Bissau with an estimate of nearly one tonne of cocaine passing through the country every day enroute to Europe. It’s believed that a month’s cocaine shipments through Guinea-Bissau is approximately equal to ten times Guinea-Bissau’s gross annual national earnings.

The poor infrastructure in Guinea-Bissau has also led to numerous industries failing to get off the ground. While Guinea-Bissau has a wealth of natural resources including oil, bauxite and phosphates, none of these commodities have been cultivated into a proper industry.

Find out more about Guinea-Bissau’s Industry Sectors.

Guinea-Bissau’s Export, Import and Trade

Much of Guinea-Bissau’s current trade is centred around the cashew nut industry. According to the African Economic Outlook, cashew nut production was responsible for more than 95 percent of Guinea-Bissau’s total exports in 2009. India was their largest export partner, purchasing almost 70 percent of Guinea-Bissau’s cashew nuts.

On the other hand, most of Guinea-Bissau’s imports are primarily consumer and capital goods. In 2009, 60 percent of its imports were made up of commodities such as rice, flour and sugar, while a further 30 percent of their total imports came from oil. Due to the contrast between the value of their imports and exports, Guinea-Bissau is currently operating under a trade deficit. Declining cashew nut prices has also resulted in an even greater trade imbalance. In 2006, Guinea-Bissau’s exports were valued at US$133 million while its imports amounted to US$200 million.

Find out more about Guinea-Bissau’s Export, Import and Trade.

Guinea-Bissau’s Economic Structure

The country’s trade deficit is evidence of Guinea-Bissau’s weak economic structure. The root cause is linked to the social and political turmoil within the country. In 2009, both Guinea-Bissau’s President Joan Bernardo Vieira and Army Chief of Staff General Batista Tagme Na Wai were assassinated within 24 hours of each other. Three senior politicians were also killed while campaigning for the presidential elections in the same year.

Surprisingly, the presidential election process was relatively peaceful. Malam Bacal Sanhá from the ruling Partido Africano da Independência da Guiné e Cabo Verde (PAIGC) was elected as president on 26 July 2009, in an election declared to be free and transparent by 150 observers from the EU, African Union (AU) and the Comunidade dos Países de Língua Portuguesa (CPLP), Hopes are on Mr. Sanhá, who is part of the liberation movement to bring stability to the nation.

Unfortunately, Mr. Sanhá is likely to face multiple structural issues that need to be addressed in order to reinvigorate the economy. The massive informal sector, coupled with a poor tax administrative system, has meant that the government often encounters difficulty in mobilising public resources. Tax revenues remain low, at about 10 percent of the national GDP, and are likely to remain around the same level unless tax reforms are implemented alongside improved administrative capabilities.

Much of Guinea-Bissau’s social infrastructure remain underdeveloped as well. While there is 4,380km of road in Guinea-Bissau, only 10 percent of the roads are paved. The remainder are often flooded and unpassable during the rainy season. As a result, transportation of people and goods within Guinea-Bissau is extremely difficult if not impossible.

The Port of Bissau, is also poorly managed and underdeveloped. Despite already handling 85 percent of Guinea-Bissau’s exports and 90 percent of its imports, it is currently operating at four times its maximum capacity. Furthermore, most of its employees are not only poorly trained but also have to work with inferior equipment in pitiable conditions.

The lack of public utilities is another problem that faces Guinea-Bissauans. Guinea-Bissau’s electricity is imported from neighbouring Senegal and the supply is confined primarily to the capital of Bissau along with seven other urban centres. According to the African Economic Outlook, only 20 percent of the population has access to electricity at 70 percent of the time.

Among its 1.657 million population, 632,700 are officially considered to be part of the labour force. However, a large portion of Guinea-Bissau’s youths are already working. One explanation could be Guinea-Bissau’s high mortality and low life-expectancy rates. According to the UN, Guinea-Bissau has the 8th highest mortality rate in the world, while its population only has an average life expectancy of 46.4 years, ranking it among the bottom ten nations in the world.

Many Guinea-Bissauans also receive little to no form of education. According to the African Economic Outlook, only 48 percent of children finished primary school in 2006, while barely 17 percent of students finish secondary school. The education system also faces the problem of poorly trained teachers, lack of teaching materials as well as sporadic attendance particularly during the cashew harvest season.

Find out more about Guinea-Bissau’s Economic Structure.

Guinea-Bissau’s Economic Forecast

Guinea-Bissau’s economic forecast is bleak. The country should generally experience growth over the next five years, however this growth will not be able to lift Guinea-Bissau out of the depression. Guinea-Bissau’s economic forecast is also conditional to future structural reforms as well as continual foreign assistance.

From 2011 to 2015, Guinea-Bissau’s GDP (PPP) is likely to see an annual growth of between 5.69 to 6.51 percent while nominal GDP (current prices, US dollars) will increase by 3.15 to 6.67 percent during the same time period. By 2015, Guinea-Bissau’s GDP (PPP) and nominal GDP (current prices, US dollars) are predicted to hit US$2.42 billion and US$1.087 billion respectively.

Likewise, Guinea-Bissau’s GDP (PPP) per capita over the next five years is expected to grow annually at a slow but constant rate of between 2.67 to 3.42 percent. Guinea-Bissau’s GDP (PPP) per capita is expected to be US$1261.68 by 2015, as compared to US$1082.01 in 2010.

Inflation rates (average consumer price change) are also expected to be in line with the 3 percent limit set by the Banque Centrale des États de l’Afrique de l’Ouest (BCEAO) that controls the West African CFA France (XOF), which Guinea-Bissau shares with Benin, Burkina Faso, Cote d’Ivoire, Mali, Niger, Senegal and Togo.

Finally, Guinea-Bissau’s current account balance is expected to increase from US$17 million in 2010 to US$20 million in 2013, and stay around the same level until 2015.

Find out more about Guinea-Bissau’s Economic Forecast.

Read more on Guinea-Bissau’s economy, including forecasts and trade statistics on EconomyWatch below.