Sao Tome And Principe

SAO TOME AND PRINCIPE

RISK RATING
High
Default High Risk Score 6.00
Normal Average 2.70
Weighted Average 2.35
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

The arrival of the COVID-19 pandemic has come at a time when the archipelago of São Tomé and Príncipe was already battling years of economic decline and ballooning debt, placing significant pressure on the small majority coalition led by Prime Minister Jorge Bom Jesus. Despite previous political successes, there has been little substantial economic change on the ground. On the contrary, economic growth has worsened since 2018 and the arrival of COVID-19 has jeopardised any significant recovery in the short to medium term. However, despite economic instability, political and social stability is expected to hold.

  • While the pandemic is taking a heavy toll on the economy, pre-pandemic constraints around energy supply, due to debts owed to oil suppliers and the technical bankruptcy of the state power utility EMAE, are likely to hinder the island‚Äôs economic recovery and reduction of its debt burden in 2020 and beyond as well. In addition, where the prospect of oil production was once a bright spot for the country, commercial oil production is not expected in the short term. The reduction of the oil price this year threatens to push out these timelines as well. Moreover, the introduction of VAT at 15 percent from 1 March 2020 ‚Äď as part of fiscal and regulatory reforms mandated by the IMF ‚Äď has been delayed to 2021, weakening the government‚Äôs ability to mobilise domestic resources for any of its developmental plans.
  • The threat of piracy to the archipelago is closely tied to how the threat evolves in the wider Gulf of Guinea. While the government has engaged with regional organisations, such as the Economic Community of West African States and neighbouring countries, to improve surveillance and anti-piracy measures, its own navy remains small and it lacks the financial resources to significantly bolster any mitigation efforts to counter a growing threat, increasing its vulnerability in this regard. Given the shift southwards of attacks in recent years, there remains a sustained risk of an attack in the country‚Äôs waters that is most likely to take the form of a kidnapping, hijacking, and/or a firing upon vessels. Despite ongoing economic constraints, frustrations are more likely to manifest in the form of protests or strikes than political violence.
  • Economic performance has been on a downward trajectory for some years. While GDP grew at an average rate of 4.5 percent between 2010 and 2018, such growth has been decelerating since 2014. Over the past two years, growth declined even further because of delays in externally financed projects, power outages, fuel shortages and a slow take-up of strategic development plans under the new government. Macroeconomic instability and high levels of debt ‚Äď estimated at 74 percent of GDP in 2020 ‚Äď even forced the country to back out of the development of its long-anticipated S√£o Tom√© deep-water port in late 2019. The primary effect of COVID-19 on S√£o Tom√© and Pr√≠ncipe has been felt through its impact on tourism, as this sector has been the primary driver of private sector growth in recent years.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
2.0
Expropriation, Nationalisation, Confiscation & Deprivation
2.0
Contract Frustration & Breach
2.0
Taxation
2.0
Bribery & Corruption
1.5
Regulatory Burden
2.0
Strikes, Riots & Civil Commotion
2.0
Security
2.5
Sovereign Default
5.0
Economic Volatiliy
6.0

Risk Rating Scale (small)

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