gambia-economic-growth

Novel Approaches Could See Gambia’s Economic Growth Explode

Gambia’s economic activity has rebounded following three waves of the pandemic in 2021.

Real GDP growth is projected at 5.6 per cent in 2022 up from 4.3 per cent in 2021 backed by construction, remittance inflows and recovery in tourism. In the medium term, growth is expected to average 5.7 per cent. This notwithstanding, the outlook is subject to downside risks including the possibility of new variants of COVID, prolonged war in Ukraine and financial tightening in advanced economies.

Gambia’s external debt primarily comprises of concessional and semi-concessional loans from multilateral and plurilateral creditors, with creditors from the Middle East forming the single largest creditor sub-group.

  • The country’s total public debt-to-GDP ratio stood at 83.8 per cent at end-2021, marginally lower than the 85.9 per cent in the previous year.
  • The Gambia has a small economy that relies primarily on agriculture, tourism, and remittances for support. It remains heavily dependent on the agriculture sector.
  • The Gambia can bank on these sectors for economic growth and to repay their debt.

Around 66 per cent of the Gambia’s PPG external debt is owed to multilateral creditors, with bilateral creditors (30 per cent) and commercial creditors (4 per cent) comprising relatively smaller shares among the creditor categories.

While approximately 30 per cent of PPG external debt is owed to the IMF and MDBs, a combined 45 per cent of debt is owed to various creditors from the Middle East according to the IMF. The Gambia has arrears on external debt owed to Libya and Venezuela. However, these arrears have materialized due to problems that are not an indication of debt distress.

The discussions on debt reconciliation with Libya are ongoing, with the most recent correspondence in March 2022. Regarding the arrears to Venezuela, the Gambian authorities received a letter in January 2022 and the Gambian authorities’ responses have not yet been made public.

The country’s total public debt-to-GDP ratio stood at 83.8 per cent at end-2021, marginally lower than the 85.9 per cent in the previous year.The Gambia has a small economy that relies primarily on agriculture, tourism, and remittances for support. It remains heavily dependent on the agriculture sector. The Gambia can bank on these sectors for economic growth and to repay their debt.

Gambian agriculture has been characterized by subsistence production of food crops comprising cereals (early millet, late millet, maize, sorghum, rice), and semi-intensive cash crop production (groundnut, cotton, sesame, and horticulture). Farmers generally practice mixed farming, although crops account for a greater portion of the production.

Groundnuts are the traditional cash crop. The Gambia also exports produce to Europe; Gambian mangoes and other fruits may now be found on the shelves of the supermarket chains like Tesco and Sainsburys. The Gambia’s largest trade partner is Cote D’Ivoire, a fellow Economic Community of West African States (ECOWAS) member, from which The Gambia imports the majority of its fuel products. Other major trade partners include China and Europe.

The agricultural sector is characterized by little diversification, mainly subsistence rain-fed agriculture with a food self-sufficiency ration of about 50 per cent. The crops sub-sector generates approximately 40 per cent of the foreign exchange and provides about 75 per cent of total household income. The crop-sub-sector employs 70 per cent of the labour force and accounts for about 30 per cent of GDP of the country.

Livestock production in the Gambia is still predominantly traditional which a low input extensive system of husbandry. The current livestock population is estimated at around 300,000 cattle: 140-150,000 sheep and 200,000-230,000 goats.

Despite the primary role of the agriculture sector in the economy, its performance and share in most key socio-economic indicators in the past decade have not been consistent. In some years, performance in production stagnated or even declined.

This has been attributed to a combination of factors, including the following; adverse climatic conditions, application of Structural Adjustment Programmes without sequencing, low private investment, especially in value-added, declining international agricultural commodity prices; soaring prices of food commodities and essential production inputs; inadequate domestic policies, institutional support and investment in the sector, particularly roads and equipment.

However, recent economic growth has been mainly driven by the services sector, including financial services, telecommunication and construction. These have the potential to make it an attractive production platform for the region and beyond.

Tourism is a crucial driver of growth. The Gambia Tourism Board stated that the industry has 42,000 people benefitting from direct employment in the tourism industry and contributes to 20 per cent of GDP.

The number of hotels has increased significantly over the past decades, and there is still considerable room for expansion. There are vast stretches of coastline available for building hotels and other tourism facilities in the designated ‘Tourism Development Area’. The government is most interested in the construction of hotels in the 4- and 5-star class ranges. River Gambia is also open to the development of cruising, sport fishing and eco-tourism resorts.

The tourism industry primarily relies on the charter market, with most tourists on package tours. Air travel links with the rest of the world are limited but there are direct and multiple flights per week to and from Europe, as well as some flights within the West Africa sub-region.

However, international flight options are growing, with Air Senegal, TAP and Turkish Airlines expanding their routes to include The Gambia in the past two years, joining Brussels Airlines and Royal Air Maroc as the major international operators in The Gambia. With a need to develop cultural tourism and the conference market, future government policies are expected to continue to promote tourism activities and encourage greater private sector investment.

The tourism industry is primarily seasonal, and most tourists travel during the Northern Hemisphere winter, while also avoiding The Gambia’s rainy season from June to September. Average hotel occupancy reaches 90 per cent in the winter months, but barely reaches 25 per cent during the rest of the year. Most tourists arrive through tour operators and many stay at hotels through all-inclusive packages. The country has two main and multiple smaller nature reserves, a small park for crocodiles, and a river island that is home to many chimpanzees, in addition to numerous craft markets.

Eco-tourism remains a nascent subsector, although there are limited establishments springing up along the River Gambia.

This presents an underexplored, highly viable niche market. The River Gambia provides opportunities for commercial hubs along its banks and is highly navigable. River transport and river activities present major untapped opportunities in tourism. There are also some efforts to integrate villagers into the tourism sector by offering their home villages as activity centres for the tourists, a Ministry of Tourism and Culture initiative.

On bilateral trade, Gambia’s largest trade partner is Cote D’Ivoire, a fellow ECOWAS member, from which The Gambia imports the majority of its fuel products. Other major trade partners include China and Europe.

In 2020, Cote d’Ivoire exported US$47.2 million to Gambia. The main products imported from Cote d’Ivoire to Gambia were refined petroleum (US$46.6 million), coffee (US$189 thousand), and artificial filament yarn woven fabric (US$97.2 thousand). During the last 25 years, imports from Cote d’Ivoire have increased at an annualized rate of 5.32 per cent, from US$12.9 million in 1995 to US$47.2 million in 2020.In 2020, Gambia exported US$30 thousand to Cote d’Ivoire. The main export products were processed fish (US$27 thousand) and artificial filament yarn woven fabric (US$2.92 thousand).

During the last 25 years the exports of Gambia to Cote d’Ivoire have increased at an annualized rate of 1.83 per cent, from US$19 thousand in 1995 to US$30 thousand in 2020.

The Gambia is a member of the ECOWAS, a regional economic union of 15 countries located in West Africa. The country is also a signatory to the African Continental Free Trade Area (AfCFTA).

The Africa Continental Free Trade (CFTA) agreement now serves as the cornerstone of efforts to transform Africa’s economy. Its ultimate overarching goal is not merely to boost intra-African trade, but to industrialise the continent.

Original Source: AllAFrica