São Tomé and Príncipe and Cabo Verde lead economic growth in Portuguese-speaking Africa in 2018

São Tomé and Príncipe and Cabo Verde (Cape Verde) are expected to lead economic growth in Portuguese-speaking Africa in 2018, followed closely by Guinea-Bissau and Mozambique, with Angola seeing the most modest forecasts for Gross Domestic Product (GDP) growth.

The International Monetary Fund (IMF) forecast for this year points to an acceleration of economic growth in São Tomé and Príncipe – the most recent member of Forum Macau, after establishing diplomatic relations with the People’s Republic of China – of 5% in 2017 to 5.5% in 2018.

In the latest assessment of the economic situation in São Tomé and Príncipe by the IMF Board of Directors, Deputy Director-General Tao Zhang noted growth at a steady pace and a favourable outlook.

“The application of sound policies to bring the budget deficit and public debt to sustainable levels will be critical to achieving sustained and robust growth and reducing poverty. In this context, the 2017-21 National Development Plan is expected to contribute to diversifying the economy and improving the business environment,” said the Council’s final statement.

For Cabo Verde, government forecasts point to a rate of 5%, although the IMF is more conservative, with a projection of 4.1%.

The Africa Monitor Intelligence newsletter wrote that the State Budget for 2018 includes a set of measures to boost the local economy, in line with the government’s programme for the current term (2016-2021), namely income tax exemption (IRPS) and the Single Property Tax (IUP), among others, in addition to the regulation of the law on recovery and insolvency proceedings, so that the companies covered may have access to tax benefits under IRPS, Corporate Tax (IRPC), Stamp Duty and IUP.

There are also plans to award residence permits to large investors and entrepreneurs who want to invest in the country and to extend the network of agreements to avoid double taxation with countries across the world, according to the same source.

The IMF also reported that Mozambique and Guinea-Bissau will post significant growth – respectively 5.3% and 5%.

In the case of Mozambique, however, there is great uncertainty, with the Economist Intelligence Unit (EIU) predicting that growth will total 4%, down from 4.2% last year.

“GDP growth will remain weak (by historical standards) in 2018 due to fragile domestic demand and reduced investment. We expect a more robust economic recovery from then on, driven by the development of the gas industry,” said the EIU.

As for Angola, the EIU also expects a slowdown, from 2.7% to 2.4% in 2018, but has recently said it may review its forecasts.

In its latest report on Angola, the EIU said there should be “significant interest in the tender” for the new telecom operator, given the potential of the market, and that greater competition among operators should lead to “better and cheaper” services, a “positive development for the emerging private sector in the country and for efforts to diversify the country’s economy, avoiding dependence on oil.”

Africa Monitor Intelligence said that openness in the telecommunications sector is seen among investors “as a test of the new government’s ability to resolve constraints on business activity,” in a country where the business environment is among the worst in the world, according to the World Bank classification. (macauhub)