Real GDP growth stabilized at an estimated 5.3% in 2018, slightly below the 5.9% in 2017, supported by robust agriculture (with 6.3% growth) and fisheries (with 8.3% growth). The country relies heavily on agriculture, especially rice and cashew nut production. Agriculture accounts for 45.3% of GDP, almost 85% of total employment, and more than 90% of exports. On the demand side, growth was driven by exports and private consumption.

The government has maintained a restrictive fiscal policy and improved revenues, so the budget deficit remained moderate at an estimated 2.5% of GDP in 2018. Total public debt declined to 49.2% of GDP in 2017 from 55.1% in 2014 through debt restructuring. Guinea-Bissau is at a moderate risk of debt distress.

Inflation was an estimated 2.0% in 2018, up from 1.4% in 2017, driven by high domestic demand and rising prices for rice and other essential food items.

The current account deficit deteriorated to 3.2% of GDP in 2018 from 0.6% in 2017, despite sharp increases in cashew nut export volume and international prices. About 90% of Guinea-Bissau’s exports are from cashew nut, while imports are dominated by machinery and construction materials (19%), fuel and refined products (18%), services (16%), and food and agricultural products (12%). Official reserves stood at $3.3 billion (or 4.6 months of imports) in 2018.

Real GDP is projected to grow by 5.1% in 2019 and 5.0% in 2020, supported by favorable cashew nut prices amid weaker harvests and by high public investment in energy, construction, and water supply. Overall, inflation is projected to be 2.2% in 2019 and 2.3% in 2020, below the 3% convergence criterion for the West African Economic and Monetary Union.

The current account deficit was an estimated 3.2% of GDP in 2018 and is projected to reach 2.3% in 2019 because of increased investment and a rising import bill of higher oil prices.

The economic outlook is highly uncertain due to political instability and volatile cashew prices, the main income source for more than two-thirds of households. Other headwinds include risks from banking instability, higher-than-expected oil prices, and heavy reliance on rain-fed agriculture that can be threatened by adverse weather.

The large concentration of domestic currency debt (39.7% of GDP) could threaten the banking sector. Improved public financial management is thus key to avoiding crowding out private investment. The government is rationalizing public expenditure through a zero-program target (zero no regularized expenditures, zero new arrears, and zero credit to the central government from commercial banks).

Sustaining strong and inclusive growth requires addressing infrastructure gaps. Only 10% of the national road network is tarred, and the national energy access rate is about 14.7%. Health and education services remain dire, held back by political instability and weak governance. The country ranked 178 of 188 on the Human Development Index in 2016. Poverty affects more than 70% of the population. Income inequality, measured by the Gini index, was last estimated at 50.7, as women remain marginalized with constrained access to credit and professional training. Managing fragility and resolving political and institutional instability will lay a solid foundation for development.