Economy of Guinea-Bissau

From Wikipedia, the free encyclopedia

Jump to navigationJump to search

Economy of Guinea-Bissau

Central Bank of Guinea-Bissau in Bissau

Currency CFA franc

Fiscal year Calendar Year

Trade organisations AU, African Development Bank, ECOWAS, World

Bank, IMF, WTO, Group of 77

Statistics

GDP  $3.821 billion (PPP) (2019 est.)

[1]

GDP growth 5.9% (2017) 3.8% (2018)

4.6% (2019e) 4.9% (2020f)[2]
GDP per capita $1,989 (PPP) (2017 est.)

Rank: 214 (2017 est.)

GDP by sector agriculture (50%)

industry (13.1%)

services (36.90%) (2017 est.)

Inflation (CPI)  0.2% (2019 est.)
Population 67% with less than $2/day (2015 est.)
below poverty line
 Gini coefficient 50.7 (2010)
Labour force 731,300 (2013 est.)
Labour force by agriculture (82%)
occupation
industry and services (18%) (2000 est.)

Unemployment N/A
Main industries food processing, beer, soft drinks
Ease-of-doing- 174th (2020)[3]
business rank

External

Exports  $188 million (2018 est.)

Export goods fish, cashew nuts, gold, ores, lumber (2019)
Main export partners  India 50%

 Belgium 28%

 Cote d'Ivoire 8%

(2019.)

Imports  $383 million (2018 est.)

Import goods refined petroleum, rice, soups and broths, wheat

products, malt extract
Main import partners  Portugal 31%

 Senegal 20%

 China 10%

 Netherlands 7%

 Pakistan 7%

(2019)
Gross external debt  $1.095 billion (31 December 2010 est.)

Public finances

Revenues $246.2 million (2017 est.)

Expenses $263.5 million (2017 est.)

Economic aid $170.2 million (31 December 2012 est.)

Foreign reserves  $356.4 million (2017 est.)

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars.

The economy of Guinea-Bissau comprises a mixture of state-owned and private

companies.[4] Guinea-Bissau is among the world's least developed nations and one of
the 10 poorest countries in the world, and depends mainly on agriculture and
fishing. Cashew crops have increased remarkably in recent years, and the country
ranked ninth in cashew production for the year of 2019. [5]
 Guinea-Bissau exports to Asia non-fillet frozen fish and seafood, peanuts, palm kernels,
and timber. License fees for fishing in their sea-zone (Gulf of Guinea) provide the
government with some small revenue. Rice is the major crop and staple food. Due to
European regulations, fish and cashew-nuts exports to Europe are totally prohibited as
well as agriculture products in general.

Contents

 1Economic history
o 1.1Early colonialism
o 1.2Colonial era
o 1.3As an overseas province
 1.3.1Independence war
o 1.4After independence
 2Present day
o 2.1Macro-economic trend
o 2.2Financial sector
o 2.3"Terra Ranka" (A fresh start): a new economic plan
 3Income from waste dumping
 4Drug trafficking
 5Energy
 6See also
 7References
 8External links

Economic history[edit]
Early colonialism[edit]
Main articles: Portuguese Guinea and Economic history of Portugal

The flag of the Guinea Company, a Portuguese company that traded in several commodities and slaves around
the Guinea coast from the 15th century.

From a European viewpoint, the economic history of the Guinea Coast is largely
associated with slavery. Indeed, one of the alternative names for the region was
the Slave Coast. When the Portuguese first sailed down the Atlantic coast of Africa in
the 1430s, they were interested in gold. Ever since Mansa Musa, king of the Mali
Empire, made his pilgrimage to Mecca in 1325, with 500 slaves and 100 camels (each
carrying gold) the region had become synonymous with such wealth. The trade
from sub-Saharan Africa was controlled by the Islamic Empire which stretched along
Africa's northern coast. Muslim trade routes across the Sahara, which had existed for
centuries, involved salt, kola, textiles, fish, grain and slaves.[6]
As the Portuguese extended their influence around the
coast, Mauritania, Senegambia (by 1445) and Guinea, they created trading posts.
Rather than becoming direct competitors to the Muslim merchants, the expanding
market opportunities in Europe and the Mediterranean resulted in increased trade
across the Sahara.[7] In addition, the Portuguese merchants gained access to the interior
via the Sénégal and Gambia rivers which bisected long-standing trans-Saharan routes. [8]
The Portuguese brought in copper ware, cloth, tools, wine and horses. Trade goods
soon also included arms and ammunition. In exchange, the Portuguese received gold
(transported from mines of the Akan deposits), pepper (a trade which lasted until Vasco
da Gama reached India in 1498) and ivory.[8]
There was a very small market for African slaves as domestic workers in Europe, and
as workers on the sugar plantations of the Mediterranean. The Portuguese found they
could make considerable amounts of gold transporting slaves from one trading post to
another, along the Atlantic coast of Africa. Muslim merchants had a high demand for
slaves, which were used as porters on the trans-Saharan routes, and for sale in the
Islamic Empire. The Portuguese found Muslim merchants entrenched along the African
coast as far as the Bight of Benin.[8]
Before the arrival of the Europeans, the African slave trade, centuries old in Africa, was
not yet the major feature of the coastal economy of Guinea. The expansion of trade
occurs after the Portuguese reach this region in 1446, bringing great wealth to several
local slave trading tribes. The Portuguese used slave labour to colonize and develop the
previously uninhabited Cape Verde islands where they founded settlements and
grew cotton and indigo. They then traded these goods, in the estuary of the Geba River,
for black slaves captured by other black peoples in local African wars and raids.
The slaves were sold in Europe and, from the 16th century, in the Americas.
The Company of Guinea was a Portuguese governative institution whose task was to
deal with the spices and to fix the prices of the goods. It was called Casa da
Guiné, Casa da Guiné e Mina from 1482 to 1483 and Casa da Índia e da Guiné in 1499.
The local African rulers in Guinea, who prosper greatly from the slave trade, have no
interest in allowing the Europeans any further inland than the fortified coastal
settlements where the trading takes place. The Portuguese presence in Guinea was
therefore largely limited to the port of Bissau.
Colonial era[edit]
As with the other Portuguese territories in mainland Africa (Portuguese
Angola and Portuguese Mozambique), Portugal exercised control over the coastal
areas of Portuguese Guinea when first laying claim to the whole region as a colony. For
three decades there are costly and continuous campaigns to suppress the local African
rulers. By 1915 this process was complete, enabling Portuguese colonial rule to
progress in a relatively unruffled state - until the emergence of nationalist movements all
over Africa in the 1950s.
For a brief period in the 1790s the British attempted to establish a rival foothold on an
offshore island, at Bolama, but by the 19th century the Portuguese were sufficiently
secure in Bissau to regard the neighbouring coastline as their own special territory. It
was therefore natural for Portugal to lay claim to this region, soon to be known as
Portuguese Guinea, when the European scramble for Africa began in the 1880s.
Britain's interest in the region declined since the end of the British slave trade in 1807.
After the abolition of slavery in the Portuguese overseas territories in the 1830s, the
slave trade went into serious decline.
Portugal's main rival were the French, their colonial neighbours along the coast on both
sides - in Senegal and in the region which became French Guinea. The Portuguese
presence in Guinea was not disputed by the French. The only point at issue was the
precise line of the borders. This was established by agreement between the two colonial
powers in two series of negotiations, in 1886 and 1902–5. Until the end of the 19th
century, rubber was the main export.
As an overseas province[edit]
In 1951, when the Portuguese government overhauled the entire colonial system, all
Portugal's colonies, including Portuguese Guinea, were renamed Overseas Provinces
(Províncias Ultramarinas). New infrastructures were built for education, health,
agriculture, transportation, commerce, services, and administration.
Cashew, peanut, rice, timber, livestock and fish were the main economic productions.
The port of Bissau was one of the main employers and a very important source of taxes
for the province's authorities.
Independence war[edit]
The fight for independence began in 1956, when Amílcar Cabral founded the Partido
Africano da Independência da Guiné e Cabo Verde (Portuguese: African Party for the
Independence of Guinea and Cape Verde), the PAIGC. In 1961, when a purely political
campaign for independence had made predictably little progress, the PAIGC
adopted guerrilla tactics. Although heavily outnumbered by Portuguese troops
(approximately 30,000 Portuguese to some 10,000 guerrillas), the PAIGe had the great
advantage of safe havens over the border in Senegal and Guinea, both recently
independent of French rule.
Several communist countries supported the guerrillas with weapons and military
training. The conflict in Portuguese Guinea involving the PAIGC guerrillas and
the Portuguese Army was the most intense and damaging of all Portuguese Colonial
War. Thus, during the 1960s and early 1970s, Portuguese development plans
promoting strong economic growth and effective socioeconomic policies, like those
applied by the Portuguese in the other two theaters of war (Portuguese
Angola and Portuguese Mozambique), were not possible. In 1972 Cabral sets up a
government in exile in Conakry, the capital of neighbouring Guinea. It was there, in
1973, that he was assassinated outside his house - just a year before a left-wing military
coup in Portugal dramatically altered the political situation.
By 1973 the PAIGC controlled most of the interior of the country, while the coastal and
estuary towns, including the main populational and economic centres remained under
Portuguese control. The village of Madina do Boé in the southeasternmost area of the
territory, close to the border with neighbouring Guinea, was the location where PAIGC
guerrillas declared the independence of Guinea-Bissau on September 24, 1973. The
war in the colonies was increasingly unpopular in Portugal itself as the people got weary
of war and balked at its ever-rising expense. Following the coup d'état in Portugal in
1974, the new left-wing revolutionary government of Portugal began to negotiate with
the PAIGC and decided to offer independence to all the overseas territories.
After independence[edit]
As his brother Amílcar Cabral had been assassinated in 1973, Luís Cabral became the
first president of independent Guinea-Bissau in the time after independence was
granted on September 10, 1974. Already as the President of Guinea-Bissau, Luís
Cabral tried to impose a planned economy in the country, and supported
a socialist model that left the economy of Guinea-Bissau itself ruined. Similarly, the
repression the authoritarian single-party regime [9] he led imposed on the population and
severe food shortages also left marks and, despite having always denied, Luís Cabral
was accused of being responsible for the death of a large number of black Guinea-
Bissauan soldiers who had fought along with the Portuguese Army against the PAIGC
guerrillas during the Portuguese Colonial War.[10]
Luís Cabral served from 1974 to 1980, when a military coup d'état led by João Bernardo
"Nino" Vieira deposed him. After the military coup, in 1980 PAIGC admitted in its official
newspaper "Nó Pintcha" (dated November 29, 1980) that many were executed and
buried in unmarked collective graves in the woods of Cumerá, Portogole and Mansabá.
All these events did not help the new-country to reach the level of prosperity, economic
growth and development the new rulers had promised to its population.

Present day[edit]
Macro-economic trend[edit]

A proportional representation of Guinea-Bissau's exports.

Following the April 2012 coup d'État growth plunged to reach -1.5% of GDP. In 2013,
the country's GDP grew only by 0.9%. This low growth level during a period of
democratic transition is explained by a combination of low administrative efficiency, low
investments on account of the political instability and a bad cashew export season.
[11]
 Key macroeconomic indicators estimated by the African Development Bank are
presented in the chart below:

Real GDP growth 2013 2014 (estimate) 2015 (projection) 2016 (projection)

Real GDP per capita growth 0.9 2.6 3.9 3.7

Real GDP per capita growth -1.5 0.2 1.6 1.3

Budget balance % GDP -1.4 -2.1 -3.9 -3.4

Current account balance %

-4.1 -0.5 -0.8 -1.2
GDP

Intermittent fighting between Senegalese-backed government troops and a military junta

destroyed much of the country's infrastructure and caused widespread damage to the
economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery
in 1999. Agricultural production is estimated to have fallen by 17% during the conflict,
and the civil war led to a 28% overall drop in GDP in 1998. Cashew nut output, the main
export crop, declined in 1998 by an estimated 30%. World cashew prices dropped by
more than 50% in 2000, compounding the economic devastation caused by the conflict.
Before the war, trade reform and price liberalization were the most successful part of
the country's structural adjustment program under IMF sponsorship. The tightening of
monetary policy and the development of the private sector had also begun to
reinvigorate the economy. Under the government's post-conflict economic and financial
program, implemented with IMF and World Bank input, real GDP recovered in 1999 by
almost 8%. In December 2000 Guinea-Bissau qualified for almost $800 million in debt-
service relief under the first phase of the enhanced HIPC initiative and is scheduled to
submit its Poverty Reduction Strategy Paper in March 2002. Guinea-Bissau will receive
the bulk of its assistance under the enhanced HIPC initiative when it satisfies a number
of conditions, including implementation of its Poverty Reduction Strategy Paper.
Because of high costs, the development of petroleum, phosphate, and
other mineral resources is not a near-term prospect. It produces 400,000 barrels/day of
petrol.
Mean wages were $0.52 per man-hour in 2009. In 2019 the minimal monthly wage it is
around 35000 CFA = US$60.
The following table shows the main economic indicators in 1980–2017. [12]

198 198 199 199 20 20 20 20 200 200 20 20 201 20 201 20 20 20

Year
0 5 0 5 00 05 06 07 8 9 10 11 2 13 4 15 16 17

0.4 0.8 1.1 1.3 1.6 1.7 1.8 1.9 2.0 2. 2. 2.3 2. 2.5 2. 2. 3.
GDP 4 0.62 4 4 7 5 3 4 4 2 14 36 6 47 4 73 92 14
in $ Bln Bln. Bln Bln Bl Bl Bl Bl Bln Bln Bl Bl Bln Bl Bln Bl Bl Bl
(PPP)
. . . n. n. n. n. . . n. n. . n. . n. n. n.

GDP
per 1, 1, 1, 1, 1, 1,
1,0 1,1 1,2 1,2 1,3 1,3 1,3 1,5 1,5
capita 562 719 872 46 57 58 67 75 84
66 50 42 79 27 66 91 46 96
in $ 1 8 6 5 5 5
(PPP)

GDP 4. 8. −1. 3. 6. 5. 5.
growt 4.9  4.3  4.6  4.0  9.0  7.1  2.0  3.3  3.2  3.4  1.0 
6  0  7  3  1  8  5 
h % % % % % % % % % % %
% % % % % % %
(real)

Inflati
on 65. 33. 45. 10. −1. 1. 5. 0. −1. 1. 1. 1.
112. 8.6  3.4  2.0  4.6  2.1 
(in 8  0  1  4  6  0  0  8  0  5  5  1 
7 % % % % % %
Percent % % % % % % % % % % % %
)

Gover
nment 23 22 20 17
debt 163  159  68  50  53  54  55  50  49  42 
... ... ... ... 4  2  4  7 
(Percen % % % % % % % % % %
% % % %
tage of
GDP)

Financial sector[edit]
The financial sector of Guinea-Bissau is relatively underdeveloped: in 2013, financial
intermediation accounted for 4% of GDP, [11] banking penetration is below 1% of the
population (IMF 2013. Article IV Consultations – Guinea-Bissau, IMF Country Report No
13/197) and access to finance is cited as the second most important constraint for
businesses.[13] As of 2015, only four banks were operating in the country. According to
the IMF, regional private foreign banks held about 65% of shares in the Bissau-Guinean
banking system (IMF 2013). Banks are regulated by the WAEMU authorities. In the
aftermath of the civil war (1998/1999), private sector credit had fallen below 1% of GDP.
In 2003 the balance sheets of banks amounted to EUR 21.3 million. Since then credit to
the economy has risen to nearly 13.8% of GDP.[13]
"Terra Ranka" (A fresh start): a new economic plan[edit]
On March 25, 2015, the Government of Guinea-Bissau convened an international donor
conference in Brussels.[14] Hosted by the European Union with support from the UNDP
and other partners including the African Development Bank and the World Bank, the
country's major partners joined in welcoming the country's new vision up to 2025, and to
put pledges forth for its strategic and operational plan dubbed "Terra Ranka" (A fresh
start).[15] Pledges totalled EUR 1.3 billion.[15]
The strategic and operational plan is composed of six pillars: (i) peace and governance,
(ii) infrastructure, (iii) industrialisation, (iv) urban development, (v) human development
and (vi) biodiversity. Each of the pillars is composed of a series of structuring projects to
be financed either through direct donor support or through the mobilisation of private
funding.[16]

Income from waste dumping[edit]

In the 1980s Guinea-Bissau was part of a trend in the African continent toward the
dumping of waste as a source of income. Plans to import toxic waste from Europe were
cancelled after an international campaign to halt the trade. [17] The government was
offered a contract to dispose of 15 million tons of toxic waste over a 15-year period. The
income from it was equivalent to twice the value of its external debt. After strong
pressure from other African countries and environmental groups the Guinea-Bissau
government renounced the deal.[18]

Drug trafficking[edit]
Over the last decade European consumption of cocaine is believed to have tripled,
[19]
 and West Africa has become a primary transit point for trafficking the drug from
Colombia to Europe.[20] Guinea-Bissau is the leading West African country in this regard,
with smugglers taking advantage of government corruption and disorder to operate
unimpeded.[21] The army and police are alleged to be complicit and lack of boats or
planes to patrol or control the vast sea-zone turn a blind eye to cocaine drug shipments
from Latin America.[22] The local population does not have access to the drug. Planes fly
in, and use Guinea-Bissau's 88 remote islands, the majority of which are uninhabited.

Energy[edit]
As of 2019, only 28% of the total population had access to electricity, with only 7% of
rural population and 56% of urban population having access to electricity. [23]
In 2016, 99% of electricity generation capacity came from fossil sources and 1% from
renewable sources.[23]

See also[edit]
 Transport in Guinea-Bissau
 Telecommunications in Guinea-Bissau
 Mining industry of Guinea-Bissau
 United Nations Economic Commission for Africa