STORY HIGHLIGHTS
- Growth strengthens but is set to ease: Real GDP rose to 5.8% in 2025, driven by a strong cashew campaign, yet growth is projected to ease to 4.8% in 2026 as political instability following the November 2025 transition and Middle East spillovers weigh on the recovery.
- Stability gains coexist with deeper vulnerabilities -- Inflation fell to 0.9% and the fiscal deficit narrowed to 6.5% of GDP, yet public debt remains above the WAEMU ceiling at 75.6% of GDP, tax revenue is the lowest in the region at 8.5% of GDP, and non-performing loans exceed 22%.
- Investing more, growing less: The share of firms investing in fixed assets rose to 61.2% over the last two decades, yet labor productivity growth fell from +6.2% in 2006 to -6.8% in 2025 -- a structural gap that must close for growth to translate into better jobs.
Strong growth, but fragile foundations
Real GDP expanded by 5.8% in 2025, driven by a strong cashew harvest and farmgate prices that supported rural incomes and private consumption. Services and construction added support, reflecting spillovers from agriculture. Inflation fell sharply to 0.9% in 2025, offering temporary relief to households amid continued political uncertainty. Recent gains, however, remain narrowly based, with the economy still heavily concentrated in raw cashew exports.
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The fiscal deficit narrowed to 6.5% of GDP, above target, reflecting capital expenditure cuts and restrained spending. Tax revenue rose slightly but remained the lowest in WAEMU at 8.5% of GDP. Public debt declined to 75.6% of GDP, supported by stronger nominal growth and a prudent concessional borrowing strategy, but remains above the WAEMU ceiling.
The external position improved modestly, as stronger export volumes and favorable terms of trade narrowed the current account deficit, though cashew continued to dominate exports. The financial sector remains fragile with non-performing loans rising above 22% in June 2025.
These developments are examined in greater depth in the Guinea-Bissau Economic Update 2026, which explores the country's macroeconomic recent development, outlook, and the structural reforms needed to unlock productivity-led growth.
Outlook dims as politics and global pressures weigh
The outlook has weakened in the wake of the November 2025 political developments and spillovers from the conflict in the Middle East, with growth projected to slow to 4.8% in 2026. The conflict impacts Guinea-Bissau through higher fuel and food import prices (each about 30% of imports) and rising freight costs that squeeze cashew export margins --estimated to shave 0.3 pp off 2026 growth, lift inflation by 2 pp, and widen the current account deficit by 1.6 pp. Short-term policy priorities should focus on protecting vulnerable households while safeguarding macro fiscal sustainability.
Medium-term growth is expected to stabilize around 5%, assuming gradual political normalization. Extreme poverty is projected to decline to 37.8% in 2028, but remains highly sensitive to food and fuel price volatility, which disproportionately affects rural households. Risks are tilted to the downside: prolonged political instability could delay reforms and weaken donor engagement, while higher global food and energy prices could strain inflation, the external position, and public finances.
Investing more, producing less: the private sector paradox
Drawing on the 2025 World Bank Enterprise Survey, the Economic Update finds that Guinea-Bissau's formal private sector remains small, predominantly domestic, and skewed toward micro and small firms, with manufacturing marginal. Firms are young -- more than half are under ten years old -- reflecting years of political instability and limited access to finance.
A central finding is the divergence between employment growth and labor productivity. The share of firms investing in fixed assets rose from 45.1% in 2006 to 61.2% in 2025, yet average real annual sales growth fell from 13.4 to 3.4%. Most strikingly, labor productivity growth turned deeply negative -- from +6.2% in 2006 to -6.8% in 2025 -- pointing to "low-quality" job creation, where firms add workers without commensurate output gains.
This disconnect between job creation and productivity lies at the heart of Guinea-Bissau's development challenge. The World Bank Group's Jobs Agenda emphasizes not only creating more jobs, but also better and more inclusive jobs. In Guinea-Bissau, addressing the foundational infrastructure - including human capital - and strengthening the enabling environment is critical to raise productivity, which will contribute to improving incomes, reducing poverty, and expanding economic opportunities.
Binding constraints have shifted from infrastructure to structural and institutional barriers. Electricity is now less binding for formal firms following the OMVG hydropower interconnection, while tax rates, access to finance, and institutional uncertainty have emerged as the most pressing constraints. Credit to the private sector remains shallow, particularly limiting small, women-led, and domestically oriented firms. Medium and large firms increasingly cite courts, customs, and regulatory unpredictability as major obstacles.
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A coordinated reform package -- sequenced by horizon and centered on firms -- can unlock the productivity gains that growth has so far failed to deliver. The Spring 2026 Economic Update identifies a few priorities that can shift Guinea-Bissau toward higher-productivity, more resilient growth.
- Broaden the tax base and simplify compliance -- including scaling up digital filing and a simplified regime for SMEs.
- Expand access to finance -- operationalize collateral registries, strengthen credit information systems, and design targeted credit lines for SMEs and women-led firms.
- Strengthen institutional predictability -- modernize customs through an electronic single window aligned with ECOWAS standards.
- Consolidate infrastructure gains -- sustain energy reliability and stronger governance of the utility.
- Close the digital connectivity gap -- reform telecom regulation and deploy the national fiber backbone.
