Guinea-Bissau Growth Masks Economic Challenges

Inflation dropped sharply to 0.9 per cent in 2025, easing pressure on household budgets, while the fiscal deficit narrowed to 6.5 per cent of GDP.

Guinea-Bissau's economy recorded solid growth in 2025, driven by a successful cashew harvest and higher rural incomes. The World Bank says deeper structural reforms are needed to build a more productive and resilient economy. According to the Guinea-Bissau Economic Update (Spring 2026), the country's real gross domestic product (GDP) grew by 5.8 per cent in 2025. Higher cashew production and favourable farmgate prices boosted household incomes and supported consumer spending, helping the economy remain resilient despite ongoing political uncertainty. The report, titled Pathways for Unlocking Productivity-Led Private Sector Growth, warns that the country's dependence on a single export crop, rising public debt and weak financial conditions continue to limit long-term economic progress.

Rising debt and weak productivity remain major concerns

Inflation dropped sharply to 0.9 per cent in 2025, easing pressure on household budgets, while the fiscal deficit narrowed to 6.5 per cent of GDP. Public debt remained high at 75.6 per cent of GDP, exceeding the ceiling set by the West African Economic and Monetary Union (WAEMU).

The World Bank also highlighted growing pressure on the banking sector. Non-performing loans climbed above 22 per cent by mid-2025, reducing the availability of credit for small and medium-sized businesses, particularly those led by women.

Looking ahead, economic growth is expected to slow to 4.8 per cent in 2026 as investment weakens and political uncertainty continues following the country's political transition in November 2025. The report also points to higher fuel prices, food import costs and freight charges linked to the conflict in the Middle East, warning that these pressures could reduce profits from cashew exports and slow progress in reducing poverty.

Private sector reforms seen as key to future prosperity

Drawing on the 2025 World Bank Enterprise Survey, the report found that while more businesses are investing in equipment and facilities, labour productivity has declined significantly. The share of firms investing in fixed assets increased from 45.1 per cent in 2006 to 61.2 per cent in 2025, yet labour productivity fell from 6.2 per cent to minus 6.8 per cent, suggesting businesses are hiring more workers without increasing output.

The report identifies taxation, limited access to finance and weak institutions as the biggest barriers to business growth. Gender gaps in business ownership and access to credit are also restricting economic development.

To improve productivity, the World Bank recommends broadening the tax base, simplifying tax compliance through digital systems, expanding financial access for small businesses and women entrepreneurs, modernising customs procedures, strengthening energy services and accelerating digital infrastructure through national fibre network expansion.

The report says that creating better conditions for businesses to invest, expand and improve productivity will be essential for generating higher incomes, creating quality jobs and reducing poverty over the coming years.