Population 6.156 million
GDP 3.824 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
5.3 |
6.0 |
21.3 |
7.5 |
|
Inflation (yearly average) (%)
|
16.6 |
16.2 |
12.6 |
10.3 |
|
Budget balance (% GDP)*
|
-10.5 |
-10.2 |
-6.6 |
-6.4 |
|
Current account balance (% GDP)*
|
-24.5 |
-54.7 |
-24 |
-15.0 |
|
Public debt (% GDP)
|
46.5 |
41.1 |
34.6 |
34.1 |
| (e) Estimate (f) Forecast * grants excluded |
||||
STRENGTHS
- Immense iron ore deposits and exploitation of other mineral resources: diamonds rutile, bauxite, gold
- Financial support from the international community
- Agricultural products: cocoa, rice, coffee, manioc
- Tourism potential
- Democracy becoming firmly embedded
WEAKNESSES
- Agriculture predominant (2/3 of the population and 40% of GDP) but under-developed
- Heavy future dependence on iron exploitation and the volatility of raw materials prices
- Inadequate infrastructures, health and education systems
- High unemployment and lack of skilled labour
Risk assessment
Strong growth driven by iron ore and the exploitation of other raw materials
Sierra Leone experienced the strongest world growth in 2012 (after Libya) with the start of operations at the Tonkolili iron mine, whose yield will also stimulate growth in 2013, as will the exploitation of historically produced raw materials (diamonds, gold, rutile). Agricultural activity, which now accounts for less than half of GDP, will remain dynamic, aided by new foreign funds, particularly for the production of bioethanol, as well as by government programmes aimed at achieving self-sufficiency in rice. Land distribution remains the subject of frequent disputes between investors, local communities and the central power due to a lack of adequate regulation. The other sectors (particularly manufacturing) will remain modest, suffering from infrastructure gaps, particularly in transport and electricity supply, despite the progress made in recent years. The services sector (20% of GDP) is expanding, particularly in tourism and telecommunications.
Rising agricultural production prompted a fall in inflation in 2012. Inflation will, however, remain high, mainly due to the abolition of fuel subsidies, too costly for the public finances.
Smaller public finances deficit but still dependent on foreign aid
After a year of tax deductions for companies operating on the new iron ore deposits, the state will start to benefit in 2013 from the tax revenue generated by this exploitation. This will give the government more latitude to drive through its policies. However, the budget will still depend heavily on foreign aid (about 30% of revenues), particularly due to completion of the IMF’s Extended Credit Facility ($45 million between 2010 and 2013) and bilateral aid and loans. The major part of these funds will be used to improve health and education policies, still deficient compared with those of the other Sub-Saharan countries. Domestic revenues (only 12% of GDP) are growing mainly through the introduction of a new tax on products and services and the levying of royalties on diamond production.
Moreover, after the ending of the HIPC and MDRI initiatives, the country’s external debt has been greatly reduced. The risks of non-repayment are low. The government is also expecting the cancellation of commercial debt by multilateral institutions.
Current accounts improving strongly but still greatly in deficit
The trade deficit fell sharply in 2012, with the stagnation of capital goods imports and, above all, thanks to the first iron exports, which have tripled the value of exports. This trend will continue in 2013 with strong exports of iron and other commodities (diamonds, rutile, etc.). Iron will account for about 70% of exports in 2013, resulting in fears of excessive dependence on the volatility of world prices. These are expected to stabilise in 2013 and will depend strongly on the prospects of the construction sector in China (biggest importer of Sierra Leonean iron). This situation also reflects inadequate diversification of the economy.
The current account deficit will still predominate in 2013 due to the scale of dividend repatriations and services provided by foreign companies. It will be funded by foreign aid, expatriates’ remittances and ongoing foreign direct investment (7% of GDP). The currency’s appreciation on the back of this export boom could reduce the competitiveness of other exported products. After sharply depreciating in 2010 and 2011, the currency (the leone) is expected, as in 2012, to remain stable against the dollar.
Re-election of President Koroma
After the November 2012 elections, President Ernest Koroma (the All People’s Congress party) was re-elected for five years with 58% of the votes, beating Julius Maada Bio (People’s Party). The opposition has made accusations of fraud but tensions will probably ease gradually, firmly embedding democracy 10 years after the end of the civil war. Koroma has been able to take advantage of the country’s attractiveness for foreign direct investment, of initiating the fight against corruption and the introduction of broad social policies. These topics will remain at the core of his second term. Future challenges relate to the proper distribution of the mining wealth, which generates few jobs, and the lessening of the country’s still sharp ethnic divide.
