afrol News, 15 November - After a dissappointing 2009, the economic development of the island nation São Tomé and Príncipe is back on track, new statistics reveal. Investments are again made on the islands.
The small Gulf of Guinea nation had seen massive economic growth during the last decade, with investors anticipating a repeatedly ostponed oil boom to set in. GDP growth had typically been aound six percent annually during the last decade, providing for substantial GDP per capita growth and reduced poverty.
However, 2009 was a poor year for the economy of São Tomé and Príncipe. With GDP growth at only 4 percent, population growth consumed most of this gain, leaving little for poverty reduction and social development.
According to the latest analysis of the International Monetary Fund (IMF), the poor performance in 2009 mostly "was driven by a decline in foreign direct investment - partly reflecting the impact of the global financial and economic crisis." Construction and trade related activities in particular had suffered from this lack of investements.
The only sector to experience continued strong growth throughout the tough year of 2009 was the tourism sector. Tourism had continued to grow in response to improved tourism infrastructure, "but remains small in relation to the overall economy," according to the IMF.
IMF and government analysts however have established that overall growth has started to rebound in 2010. Current predictions foresee a 6 growth in GDP for this year, despite the fact foreign direct investment (FDI) continued to decline.
"Although FDI declined further in 2010, an increase in externally-financed public investment projects boosted economic activity," according to IMF analyst Tsidi Tsikata.
Growth in São Tomé was also helped by a new stability of its currency, the dobra, which has been pegged to the euro since the beginning of 2010. This move had also strongly helped to reduce inflation in the island state, according to Mr Tsikata.
Also a major recent debt cancellation by major creditors had assisted the positive trend in the São Toméan economy. However, the country remained "at high risk of falling back into debt distress because of its limited export and production base," according to Mr Tsikata.
Indeed, São Tomé authorities and IMF analysts agree that the economic outlook of the twin islands is generally positive. The projected GDP growth for São Tomé and Príncipe is set at 6.5 percent in 2011, 2012 and 2013. Inflation is expected to slow off further.
These relatively positive growth projections do not foresee any oil boom in the period. The current round of exploratory drillings in the Joint Development Zone with Nigeria have yet to conclude on commercially viable reserves. If such reserves were found, initiation of oil production could start no earlier than in 2015, according to government analysts.
"So far, oil-related revenues have been mainly from signature bonuses received in 2005 and 2007 from the issuance of prospecting licenses," a recent IMF report says. Meanwhile, government has made major investments in infrastructure and administration allowing for future oil production.
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