São Tomé and Príncipe has maintained macroeconomic stability, despite many challenges. The COVID-19 pandemic exacerbated long-standing socio-economic vulnerabilities, which were further compounded by persistent energy shortages and damages from the floods in end-2021. Growth declined in 2021 with power outages, while a targeted expansion of the cash transfer and food support programs provided needed relief to the most vulnerable. Strong grant financing remains critical for mitigating the impact of the pandemic. Vaccinations are proceeding, although the new COVID-19 variants pose risks for protracting the impact of the pandemic and require renewed actions to mitigate those risks. Parliamentary elections are expected in October 2022.
Near-term macroeconomic prospects continue to improve in the context of higher oil prices and a gradual global recovery from the pandemic shock, but the medium-term outlook remains challenging and highly uncertain. Oil production remains muted, debt and inflation remain elevated, and non-oil activity is expected to recover only gradually. However, continued strong fiscal performance (aided by higher oil revenues), exchange rate stabilization, and a return to positive non-oil growth would contribute to a reduction in the debt-to-GDP ratio this year, easing debt vulnerabilities.
While improving, the economic outlook remains highly challenging, given the slow and uncertain recovery from the COVID-related shocks. Heavily dependent on oil, the Angolan economy has suffered from weakness in that sector, with falling production (related to the pandemic) and only a partial rebound in international prices recently. These shocks have led to a fifth straight year of recession and hardship. The public debt-to-GDP ratio has risen to very elevated levels, driven by recent real exchange rate depreciation. Nevertheless, strong fiscal performance and active debt management are setting the stage for a gradual economic recovery and reduction in debt vulnerabilities.
Sub-Saharan Africa is struggling to navigate an unprecedented health and economic crisis—one that, in just a few months, has jeopardized decades of hard-won development gains and upended the lives and livelihoods of millions.