Guinea-Bissau: Guinea-Bissau Outlook for 2013-14

The country (Guinea-Bissau) is situated in Western Africa, bordering the North Atlantic Ocean, between Guinea and Senegal.
It has borders with Guinea for 386km and Senegal for 338km.
Land in Guinea-Bissau is mostly low coastal plain rising to savanna in east.
The climate is tropical, generally hot and humid; monsoonal-type rainy season (June to November) with southwesterly winds, dry season (December to May) with northeasterly harmattan winds.

Outlook for 2013-14

• The military will retain significant influence over political affairs, thus undermining stability and preventing a swift return to constitutional order.
• Restoring a measure of political stability, inclunding support from development partners, will depend on the holding of free and equitable elections, and reinforcing civilian control over the military.
• The interim authorities' weak international backing and lack of popular legitimacy, coupled with a fragmented political scene, will hinder effective government and economic policymaking.
• Assuming normal weather conditions and an uninterrupted cashew trading season, economic increase is expected to rebound to 2.1% in 2013 and 3.2% in 2014 as agricultural increase and public investment pick up.
• Slow revenue increase will be offset by the government's weak spending capacity, and the fiscal deficit will narrow to 2.6% of GDP in 2013, before widening slightly to 2.7% of GDP in 2014 as the elections boost spending.
• Although exports will recover slightly in 2013, the country's dependence on imported food and fuel means that the current-account deficit will remain wide, at an average of 12.2% of GDP in 2013-14.

Review

• Tensions between the legislature and the executive heightened next the parliamentary speaker accused the latter of mismanaging the economy. The fractured political scene is delaying the return to constitutional order.
• Alberto Nambeia was surprisingly elected leader of the country's second-major party, the Partido da Renovação Social. The former leader, Kumba Yalá, will remain influential behind the scenes.
• José Ramos-Horta was appointed as the new UN envoy in the country. Despite his previous achievements, it will take additional than one person's competences to overcome Guinea-Bissau's current fragile political situation.
• The regional central bank, Banque centrale des Etats de l'Afrique de l'ouest (BCEAO), reduced its lending rate by 25 basis points on the back of falling inflation. We expect this rate to remain unchanged until 2015.
• Affected by political instability and low request, cashew nut exports in 2012 fell short of official targets despite a surge late in the season. The low prices paid to producers have had a negative impact on food security levels.