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- GDP (PPP):
- $0.4 billion
- 4.0% growth
- 4.3% 5-year compound annual growth
- $2,194 per capita
- Inflation (CPI):
- FDI Inflow:
São Tomé and Príncipe’s economic freedom score is 53.3, making its economy the 136th freest in the 2015 Index. Its score has increased by 4.5 points from last year, reflecting impressive improvements in seven of the 10 economic freedoms related to regulatory efficiency, the management of public finance, and the rule of law. São Tomé and Príncipe has recorded the largest score improvement of any country graded in the 2015 Index, yet it is still ranked 29th out of 46 countries in the Sub-Saharan Africa region, and its score is below the world average.
This year’s gains in economic freedom have erased losses recorded in 2013. An improvement of 3.8 points since 2011 has been led by a gain of over 30 points in business freedom, moving São Tomé and Príncipe out of the “repressed” category.
Despite these improvements, however, economic freedom is not firmly established. Rampant corruption is exacerbated by oil exploration and development aid. The government dominates the domestic economy, and the bureaucracy hinders business formation and labor market efficiency. Efforts to attract capital for oil exploration have not translated into a well-crafted investment regime, hindering chances for development of a competitive financial system.
Manual Pinto da Costa, who served as president for 15 years following independence from Portugal in 1975, returned to office in 2011.Under São Tomé and Príncipe’s democratic constitution, the president shares power with a prime minister who requires the confidence of the parliament to retain power. In 2012, Prime Minister Patrice Trovoada won legislative elections, but he received a vote of no confidence and was replaced by current Prime Minister Gabriel Costa. São Tomé’s economy, one of Africa’s smallest, is agriculture-based and highly vulnerable to external shocks. São Tomé remains dependent on foreign assistance. Oil production is expected to begin in late 2015, but both São Tomé and Nigeria claim unexploited offshore oil fields.
Although the government has undertaken numerous reforms (e.g., an August 2013 anti–money laundering law), development aid and offshore oil exploration have fueled corruption among the ruling elite. Bribery, embezzlement, and mismanagement of public funds are regarded as endemic. The judiciary is independent but weak, underfunded, understaffed, inefficient, and susceptible to political influence. Property rights are not protected effectively.
The top individual income tax rate is 13 percent, and the top corporate tax rate is 25 percent. Other taxes include a sales tax and a dividend tax. Overall tax revenues equal approximately 14 percent of gross domestic product. Government spending equals 44.2 percent of domestic production, and public debt is equivalent to 85 percent of the economy.
The time needed to start a company has been reduced to four days, and licensing requirements have been simplified. In the absence of a well-functioning labor market, informal labor activity remains significant. The government stated its intention to cut fuel and power subsidies and fix problems in the state-owned water and electricity firms in 2014 but took no action.
The average tariff rate for São Tomé and Principe, a member of the Economic Community of Central African States, was 7.4 percent as of 2008. Pork imports are not allowed. Foreign investment generally receives national treatment. The underdeveloped financial sector, consisting of eight firms, does not provide adequate access to banking services for a large portion of the population.