Recent developments
Guinea-Bissau¡¯s economy remained resilient in 2024, despite a challenging cashew campaign, with GDP growth reaching 4.8 percent. While activity in the primary sector was affected by a reduction in cashew production due to adverse weather conditions and lingering effects from the poor 2023 cashew marketing campaign, robust performance of the services sector supported growth.
While average inflation decelerated to an average 3.8 percent in 2024 from 7.2 percent in 2023, prices have been on an upward trend since June 2024, slightly increasing extreme measured by the international poverty rate $2.15 (PPP2017). Rural areas continued to bear the brunt of poverty, reflecting persistent vulnerabilities in the agricultural sector.
Despite easing international import prices, lower cashew exports caused the current account deficit (CAD) to widen to 8.5 percent of GDP in 2024 from 8.3 percent of GDP in 2023. Guinea-Bissau is a monocrop economy, and cashew nuts account for more than 80 percent of exports.
The fiscal position improved in 2024, with the deficit narrowing to 7.3 percent of GDP, from 8.2 percent of GDP in 2023. However public debt climbed to 82.3 percent of GDP. The increase in public debt was driven by a higher-than-expected fiscal deficit due to lower tax revenue and higher interest expenses.
Outlook and risks for 2025-2028
The macroeconomic outlook for Guinea-Bissau is favorable, with growth projected to average 5.1 percent over 2025¨C2028, assuming favorable cashew production, strong activity in the services sector, and continued investment in key infrastructure projects. Inflation is expected to gradually decline, and to reach 2.0 percent by 2028. Higher cashew prices and moderated food inflation are expected to contribute to a gradual reduction in extreme poverty incidence. Strong commitment to the revenue-based fiscal consolidation could bring the deficit to 3 percent of GDP in 2028 and debt to 72.4 percent of GDP.
However, significant risks remain. Economic growth could be dampened by climate change shocks and their direct impact on agriculture, fisheries, and infrastructure. Structural challenges¡ªincluding low agricultural productivity, limited rural financial services, and climate risks¡ªpose significant obstacles to more substantial and sustainable poverty reduction.
Policy recommendations to enhance revenue mobilization
The Economic Update outlines several policy recommendations that Guinea-Bissau can pursue to create fiscal space and address the rising need for quality public services, especially in the country¡¯s priority areas of health, education, and infrastructure. Recommendations include:
1. Broaden the tax base to increase revenue mobilization and boost efficiency:
- Rationalize VAT tax expenditures, including the exemption of natural gas, private education, private health care and fee-based financial services.
- Harmonize tax rates by alcohol content by increasing the excise tax rate on beer and wine by 25 percent and 200 percent respectively.
- Eliminate implicit fuel subsidies by aligning taxes with external costs.
- Improve tax efficiency for CIT, PIT and VAT including through modernizing customs operations, deploying digital tools, and improving taxpayer services.
2. Conduct a comprehensive tax expenditure review:
- Increase transparency by showing which sectors and firms benefit most from exemptions, reduced rates, or tax holidays.
- Align reporting with regional benchmarks to facilitate cross country comparisons.
- Require all ministries granting tax incentives to file reports on beneficiaries and justifications.
- Establish a dedicated unit in the Ministry of Finance to prepare and publish a tax expenditure report annually.
- Require tax filing, even if no tax is due, to enable measurement of the size of the foregone revenue and to verify compliance with incentive conditions.
- Collect basic financial statements from tax incentives beneficiaries to gauge the real cost-benefit of incentives granted.
Read and download the report, .
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The Guinea-Bissau Economic Update (EU) is a periodic publication of the ÐÓ°ÉÂÛ̳ that highlights recent economic trends and discusses development issues relevant to the country. This edition of the EU consists of two chapters. The first chapter presents the economic developments in 2024 and the economic outlook for 2025-2028, with an assessment of the risks and challenges. The second chapter analyzes tax revenue composition and performance, and concludes with a set of policies that could help boost revenue mobilization in Guinea-Bissau.