Discovered and claimed by Portugal in the late 15th century, the islands' sugar-based economy gave way to coffee and cocoa in the 19th century - all grown with African plantation slave labor, a form of which lingered into the 20th century. While independence was achieved in 1975, democratic reforms were not instituted until the late 1980s. The country held its first free elections in 1991, but frequent internal wrangling between the various political parties precipitated repeated changes in leadership and four failed, non-violent coup attempts in 1995, 1998, 2003, and 2009. In 2012, three opposition parties combined in a no confidence vote to bring down the majority government of former Prime Minister Patrice TROVOADA, but in 2014, legislative elections returned him to the office. President Evaristo CARVALHO, of the same political party as Prime Minister TROVOADA, was elected in September 2016, marking a rare instance in which the positions of president and prime minister are held by the same party. New oil discoveries in the Gulf of Guinea may attract increased attention to the small island nation.
Central Africa, islands in the Gulf of Guinea, just north of the Equator, west of Gabon
Population - distribution
Sao Tome, the capital city, has roughly a quarter of the nation's population; Santo Antonio is the largest town on Principe; the northern areas of both islands have the highest population densities
Portuguese 98.4% (official), Forro 36.2%, Cabo Verdian 8.5%, French 6.8%, Angolar 6.6%, English 4.9%, Lunguie 1%, other (including sign language) 2.4%
SAO TOME (capital) 71,000 (2014)
- Conventional long form
- Democratic Republic of Sao Tome and Principe
- Conventional short form
- Sao Tome and Principe
- Local long form
- Republica Democratica de Sao Tome e Principe
- Local short form
- Sao Tome e Principe
- Sao Tome
- Geographic coordinates
- 0 20 N, 6 44 E
- Time difference
- UTC 0 (5 hours ahead of Washington, DC, during Standard Time)
has not submitted an ICJ jurisdiction declaration; non-party state to the ICCt
This small, poor island economy has become increasingly dependent on cocoa since independence in 1975. Cocoa production has substantially declined in recent years because of drought and mismanagement. Sao Tome and Principe has to import fuels, most manufactured goods, consumer goods, and food, making it vulnerable to fluctuations in global commodity prices. Maintaining control of inflation, fiscal discipline, and increasing flows of foreign direct investment into the nascent oil sector are major economic problems facing the country. The government also has attempted to reduce price controls and subsidies.
- External debt stocks
- US$ 249,357,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -52,502,405
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 171,344,793
- Exports of goods and services
- US$ 39,861,634
- Total Merchandise Trade
- FDI, net inflows
- US$ 22,152,093
- Commercial Service Exports
- US$ 82,687,644
cocoa, coconuts, palm kernels, copra, cinnamon, pepper, coffee, bananas, papayas, beans; poultry; fish
light construction, textiles, soap, beer, fish processing, timber
- cocoa 80%, copra, coffee, palm oil (2010 est.)
- Netherlands 29.1%, Belgium 22.3%, Spain 15.4%, US 6.6%, Nigeria 5.1% (2015)
- machinery and electrical equipment, food products, petroleum products
- Portugal 65.4%, China 8.1%, Gabon 7.3% (2015)
- Country Risk Rating
- A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.
- Business Climate Rating
- The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.
- Considerable oil potential
- Prospects for development of tourist sector
- Supported by international donors
- Links developed with Portugal and Portuguese speaking countries (Angola, Brazil)
- Dobra pegged to the euro
- Heavily dependent on public aid
- Economy still dominated by agriculture and fishing
- Business environment shortcomings
- Underdeveloped and weak banking sector (non-performing loans ratio 18%)
Activity is expected to be more dynamic in 2017, buoyed by investments in the tourism sector and public infrastructure projects. Investment will receive a boost due to the moderate increase in demand from the Euro zone, the country's key trade and tourism partner. Indeed, tourism will play an increasingly important role in the economy (60% of total exports) and investments in the sector will be supported by public spending and by growing inflows of FDIs. The country's economic activity is constrained because of its geographic isolation and limited natural resources. Nonetheless, the agricultural sector will be supported by the gradual increase in commodity prices and demand for its products. The country mainly produces and exports cocoa, coffee, and palm oil.
Furthermore, international aid will also help reinvigorate activity and reduce the poverty rate (66%) thanks especially to support from its principal donors, Taiwan and Japan.
Inflation is expected to edge up because of the moderate increase in oil prices expected in 2017. However, it will remain well below previous levels (16% in 2010), specifically thanks to the currency peg of the dobra to the euro, in place since 2010. Household consumption (accounting for 75% of GDP) will, therefore, remain firm, due to the government's expansionary fiscal policy and moderate inflation.
The budget deficit is expected to continue to decline in 2017 because of better performance by the fiscal system, which will boost income. However, low levels of government revenue mean there is still a need for international aid, agreed in the form of donations (particularly from Asian countries) or concessional loans (IMF, World Bank). Meanwhile, public spending is concentrated in infrastructure (transport, energy) and in other sectors such as tourism and agriculture, with the aim of boosting employment and competitiveness. The significant level of payment arrears, as well as the 3-year IMF loan in 2015 for USD 6.3 million, will still weigh on the country's indebtedness.
The current account deficit will remain stable, although still at a high level, because of the lack of export diversification. However, the higher price and production of cocoa (the main export) will help partly offset the rise in imports which is mainly explained by higher commodity prices and increased domestic demand. The improvement in the services balance, through tourism, will also help stabilise the current account.
The exchange rate against the dollar is also expected to remain stable, insofar as the currency is pegged to the euro. Moreover, the reasonable level of foreign exchange reserves (5.1 months of imports) means the dobra's peg against the euro can be maintained in the short term.
Meanwhile, the banking sector in São Tome remains weak. Most of the banks are poorly capitalised and there is a high non-performing loan ratio (about 30% of total gross loans). The sector is also highly concentrated, numbering only six banks, the largest being Banco Internacional de São Tomé e Príncipe, which accounts for almost 50% of loans and deposits.
The absolute majority won by the IDA (Independent Democratic Action) in the October 2014 parliamentary elections brought political stability. Prime Minister Patrice Trovoada could thus be the first government leader to complete his term of office (in 2018) since 1990. Furthermore, the July 2016 presidential elections confirmed this stability since Evaristo Carvalho, member of the IDA, was elected to head the country. In this semi-presidential regime, the fact that the prime minister and the president are from the same party gives the government plenty of leeway to reform the country.
Finally the port construction project scheduled for 2019 (total estimated cost of USD 800 million, equal to 2.4 times GDP) will be partly funded with Chinese financial support to the tune of USD 120 million. As a result, relations with Taiwan, one of the country's main funding providers could become strained.
The country is in 162nd place out of 190 on the World Bank's 2017 Ease of Doing Business Index,with the business climate hampered by the difficulties in obtaining credit and in honouring contracts.