Author: World Bank Group
Type of publication: Article
Date of publication: March 2021
According to the World Bank’s first Economic Update on the Gambia, real GDP growth exceeded 6% two years in a row before COVID-19 struck, driven by rebounding confidence, investment, low interest rates, and growing tourism. While Tourism arrivals had started well at the beginning of 2020, they collapsed by about 50% in March 2020, as containment measures were put in place swiftly. GDP growth is expected to have stagnated in 2020, however, the economy is expected to gradually recover in 2021 as the pandemic recedes, conditional on political stability and normal weather conditions.
The impact of the pandemic has also hindered poverty reduction and reversed some of the poverty reduction in 2020 with most households reporting declining income from agriculture and fishing, non-farm businesses, and salaried employment. Moreover, the closure of schools, during the lockdown, is expected to have resulted in learning losses, which could affect human development outcomes in the long term, while limited digital infrastructure hampered online learning.
Official remittances grew at record pace in the second quarter of 2020
On a more positive note, official remittances grew at record pace in the second quarter of 2020, perhaps due to travel restrictions closing informal channels. As a result, international reserves continued to rise in 2020. The crisis has also put downward pressure on inflation, which had previously been increasing. Favorable rainfall, good access to inputs, and few pest outbreaks have resulted in a strong turnaround in agricultural output.
The Gambia reinstated fiscal discipline in 2019. The country has registered an overall fiscal deficit of 2.5% of GDP in 2019 —the lowest level in a decade. The fiscal deficit, however, rose in the first half of 2020 to accommodate pandemic-related spending pressures, although tax revenue showed resilience in the face of the shock. Donor assistance and budget grants also supported government’s expanded spending.
The Government continues to make large transfers to state-owned enterprises, the fiscal burden of which is estimated to be around 6% of 2019 GDP. Restructuring and performance improvement plans should be prepared and implemented for those enterprises with the most significant impact on the economy and on public finances in the first phase.
The economy’s inability to create enough high-quality jobs could explain the underuse of the working-age population
The economy’s inability to create enough high-quality jobs could explain the underuse of the working-age population. An inclusive labor market will require job creation and wage growth, which depend on a successful transformation of the economy and higher productivity.
Robust digital infrastructure will be crucial to build resilience in the face of shocks, including the pandemic. Equally important will be a robust electrical system and the water, sanitation, and hygiene infrastructure.
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