Highlights:

The report on the economic situation in Guinea-Bissau covers topics such as economic growth, fiscal deficit, public debt, poverty, and pension schemes. The report highlights several key issues and risks, including the country's heavy reliance on cashew exports, the impact of political instability, and the need for fiscal reforms. It also discusses some potential opportunities for growth, such as the expansion of the cashew processing industry and the possibility of new trade links.

In terms of economic growth, the report mentions that Guinea-Bissau's economic growth rate has been below potential due to factors such as testing international cashew market conditions and issues with exporting cashew. The country's economic growth remained at 4.2 percent in 2023, below the potential rate.

Regarding the fiscal deficit, the report states that the weak export performance of the cashew campaign put pressure on the fiscal situation, causing the fiscal deficit to widen to 7.6 percent in 2023. This was driven by poor export volumes of cashew, the introduction of rice subsidies, and lower grant financing.

Public debt in Guinea-Bissau remained relatively high, at an estimated 77.8 percent of GDP in 2023, despite falling from 80.4 percent in 2022. The decline in the ratio is largely attributed to higher nominal GDP growth, as nominal debt levels continue to rise. Poverty continues to be widespread in Guinea-Bissau, with poverty increasing by 2.8 percentage points between 2018 and 2021.

The report suggests that the combination of agricultural growth and high food prices has left poverty unchanged between 2022 and 2023. On the subject of pension schemes, the report highlights that the current parametric design is unaffordable in its present form, compromising the fiscal sustainability of the scheme. The analysis shows that the accrual rate of 2.8 percent is much higher than the regional average (2.2 percent) and a contribution rate of 6 percent is far lower than it needs to be (16.8 percent) if the accrual rate is to remain at 2.8 percent.

Overall, the report paints a picture of a country facing several economic challenges and risks, but with some potential opportunities for growth. Addressing these issues will require a combination of fiscal reforms, improvements in governance, and targeted policies to support economic development and poverty reduction.

[Text generated by GPT@JRC using Generative AI technology]