What next?

tauringhuang.

Jul 31st 2009
From the Economist Intelligence Unit ViewsWire

Guinea Bissau's prospects are mixed


Malam Bacai Sanhá has won the run-off round of the presidential elections and—crucially—the losing candidate has conceded defeat. There is still no guarantee that the new president will be able to secure the backing of the army and the co-operation of the government, however.

Malam Bacai Sanhá, the candidate of the ruling Partido Africano da Independência da Guiné e Cabo Verde (PAIGC) and an interim president in 1999-2000, has won the second round of Guinea-Bissau's presidential elections, securing 63% of the vote. Crucially, the defeated candidate, Kumba Yala—another former president, and the leader of the main opposition Partido da Renovação Social—has conceded defeat.

In theory, the poll could help create a new era in Guinea-Bissau's politics, not least because the PAIGC also has a majority in the National Assembly for the first time since 1999. This could enable the government to push ahead with the major reforms needed to boost economic development, and attract donor funds and foreign investment. However, while Mr Yala's public acceptance of the result is welcome—on previous occasions he has disputed the outturn, which could potentially have proven damaging given his influence within the army—there is still no guarantee that the new president will be able to secure the backing of the army and the co-operation of the government.

This could have serious implications for the resumption of donor funds, on which the country's growth depends. While the IMF has begun talks on moving Guinea-Bissau to a poverty reduction and growth facility (PRGF), the political unrest following the early March assassination of the previous president, João Bernardo Vieira, is likely to delay the award of a new PRGF. In addition, the country’s poor performance under previous IMF programmes and the Fund’s belief that the last PRGF was granted too easily could well make the Fund cautious this time around.

If the political environment remains peaceful, and there are no fresh coup attempts or assassinations, growth prospects for 2009-10 are good, as donors scale up funding against a background of new investment in mining and infrastructure and ongoing recovery in the cashew sector. However, the risk of political instability will continue to undermine growth prospects; as a result, we forecast that real GDP growth will be constrained to just 3.6% in 2009 and 3.8% in 2010.