Guinea-Bissau Shows Economic Resilience Amid Fiscal Challenges, Says World Bank

The World Bank report emphasizes that Guinea-Bissau’s revenue mobilization remains among the lowest in the WAEMU region, well below the bloc’s 20% of GDP convergence benchmark.

Despite a challenging year for its key agricultural sector, Guinea-Bissau's economy demonstrated notable resilience in 2024, according to the latest Guinea-Bissau Economic Update published by the World Bank. The report provides a comprehensive analysis of recent macroeconomic trends, a forecast for 2025–2028, and in-depth policy guidance on how to enhance domestic revenue mobilization in one of West Africa’s most fiscally constrained nations.

Stronger Growth, Easing Inflation

Guinea-Bissau’s real GDP expanded by 4.8% in 2024, a modest improvement from the 4.4% recorded in 2023. The performance is particularly significant considering the disruptions in the cashew campaign, a vital source of income and foreign exchange for the country. The services sector and public investment in infrastructure projects helped offset shortfalls in cashew-related earnings.

At the same time, inflation declined sharply, averaging 3.8% in 2024, compared to a steep 7.2% in 2023. This moderation in price pressures provided much-needed relief for consumers and improved purchasing power among lower-income households.

Public Finances Under Strain

Despite stronger growth and improved inflation metrics, the public debt burden grew to 82.3% of GDP in 2024. This increase reflects persistent fiscal pressures, elevated financing needs, and tighter financial conditions across the West African Economic and Monetary Union (WAEMU) region.

The fiscal deficit improved slightly to 7.3% of GDP, mainly due to tighter expenditure controls and higher donor support, even as revenue collection lagged behind expectations. The World Bank report emphasizes that Guinea-Bissau’s revenue mobilization remains among the lowest in the WAEMU region, well below the bloc’s 20% of GDP convergence benchmark.

Tax Reform Imperative

The 2024 edition of the Economic Update devotes significant attention to Guinea-Bissau’s tax system, describing it as overly complex and riddled with exemptions that erode the base and limit fiscal space.

“Tax pressure in Guinea-Bissau is low and inefficient,” notes Maria Elkhdari, the World Bank’s Country Economist and lead author of the report. “Rationalizing tax expenditures and improving oversight mechanisms will be critical.”

Key policy recommendations include:

• Broadening the VAT base, currently constrained by excessive exemptions

• Strengthening administration of Personal Income Tax (PIT) and Corporate Income Tax (CIT)

• Adjusting excise duties on fuel, alcohol, and tobacco to improve revenue and health outcomes

• Increasing transparency and oversight of tax expenditure programs

The report underlines that effective implementation of these reforms could help unlock domestic resources for urgent public investments in education, healthcare, infrastructure, and climate resilience.

Outlook to 2028: Cautious Optimism

Looking ahead, the World Bank forecasts a favorable growth trajectory averaging 5.1% per year from 2025 to 2028, provided several assumptions hold:

• A rebound in cashew production, supported by stable market conditions

• Continued strength in service sector activities, including telecom and retail

• Progress in public infrastructure, particularly road, energy, and port projects

The outlook also includes a projected improvement in the fiscal balance, contingent on robust political will to undertake revenue-based fiscal consolidation. The report flags 2025 as a pivotal year that will require decisive fiscal action to maintain debt sustainability and finance development goals.

“Strengthening revenue mobilization is not just a technical necessity—it’s a development imperative,” said Rosa Brito, the World Bank’s Resident Representative in Guinea-Bissau. “With the right reforms, the country can build a more equitable, efficient, and resilient economy.”

A Call to Action

As Guinea-Bissau faces continued vulnerability to commodity shocks, climate events, and regional instability, the report underscores the urgent need for economic diversification, institutional reform, and greater transparency in public finance management. The Guinea-Bissau Economic Update 2024 serves as both a snapshot of economic resilience and a roadmap for policy action to ensure inclusive and sustainable growth.