Country Report Guinea-Bissau July 2009

Outlook for 2009-10

Since the assassinations in March of the president, Joao Bernardo Vieira, and the army chief, the political transition and presidential election campaign have been marred by intimidation and murder of political figures, threatening political stability still further. Nonetheless, the first round of the election is set to be held on June 28th; its successful completion will be crucial for resumption of donor aid, upon which growth depends. Real GDP growth is forecast to rise from an estimated 3.2% in 2008 to 3.6% in 2009 and 3.8% in 2010, following a recovery in agricultural output and higher donor inflows. After rising in 2008, inflation is forecast to fall to 2.8% in 2009 and 3.8% in 2010, owing to increased food production and the tight monetary policy of the regional central bank. Weak export growth and rising deficits on the invisibles account will lead to current-account deficits of 2.5% of GDP in 2009 and 3% of GDP in 2010.

The political scene

Tensions have remained high in Guinea-Bissau, with reports of intimidation and violence against political figures. The army has claimed to have put down an attempted coup d'etat, resulting in the deaths of one of the presidential candidates, Baciro Dabo, and the former defence minister, Helder Proenca, and numerous arrests. Despite the ongoing instability, the electoral commission has insisted that the presidential election will go ahead on June 28th.

Economic policy

In June the IMF disbursed a third tranche, worth SDR1.8m (US$2.7m), under Guinea-Bissau's emergency post-conflict assistance (EPCA) programme, signalling the Fund's re-engagement after the disruption caused by the wave of political attacks since November 2008. The government has estimated that it needs CAFfr30bn (US$64m) of external support to fund the shortfall in the 2009 budget, but donor pledges have remained thin on the ground.

The domestic economy

An international consortium, GB Phosphate Mining, has resumed exploration activities in Farim, in north-eastern Guinea-Bissau, after eight months of inactivity following fierce disagreements with the previous government. The European Commission and the World Bank have announced funding for projects to improve the provision of drinking water and sewerage services, which have suffered years of underinvestment.

Foreign trade and payments

Despite the recent recovery in cashew exports, concerns are growing that little progress has been made in developing the domestic processing industry, greatly reducing the value of the country's main commodity export.

This report covers the following industry codes:
SIC Code: 10;49
NAICS Code: 212;22