Population 33.51 million
GDP 51.583 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011* | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
3.5 |
-3.3 |
-11.1 |
-0.6 |
|
Inflation (yearly average) (%)
|
13.1 |
18.3 |
28.6 |
17 |
|
Budget balance (% GDP) *
|
-0.4 |
-1.3 |
-3.7 |
-3.2 |
|
Current account balance (% GDP)
|
-2.1 |
-0.5 |
-7.4 |
-6.5 |
|
Public debt (% GDP)
|
72 |
76 |
98.8 |
111.4 |
| (e) Estimate (f) Forecast **Concerning the unified country until the 1st half of 2011 but only Sudan in the second half | ||||
STRENGTHS
- Member of the African Union and of COMESA (Community Market for Eastern and Southern Africa)
- Strategic position between the Middle East and West Africa
- Relative stabilisation thanks to oil deal with South Sudan
WEAKNESSES
- Loss of share in oil revenues with South Sudan’s independence
- Unsustainable foreign debt
- Bank sector in great trouble
- Lack of infrastructure investment
- Major governance shortcomings
- Insecurity (especially on border with South Sudan)
- High unemployment (especially amongst young people) and poverty
Risk assessment
Recession will ease in 2013
In 2012, growth was hit by the adverse effects of South Sudan’s independence (declared in July 2011) as the latter owns three quarters of oil wealth. In 2013, the country is expected to benefit from the oil deal (August 2012) with South Sudan enabling oil production and exports to restart. Nevertheless, high inflation and the government’s three-year austerity programme (adopted in June 2012) should depress private and public consumption. As for investment, this is due to remain limited because of financing constraints and a risky business climate (considerable insecurity resulting from border tensions). On a positive note, external demand for the country’s gold resources will help sustain gold output. On the supply side, apart from mining, services could benefit from a slight rebound if the oil deal with South Sudan is implemented and kept to.
Meanwhile, inflation, resulting from Central Bank decisions to monetise the public deficit and devalue the currency (decided in June 2012), is likely to slow but will remain very high as many food products are imported.
Country’s precarious financial position
The independence of South Sudan triggered a steep decline in trade, which had previously been driven by the oil sector. In 2013, if the oil deal with South Sudan lasts, Sudan could benefit from a recovery in oil exports. Even if the deal is suspended, the country should be able to reduce its trade deficit thanks to increased gold exports (less than 10% of total exports before the secession and now about 50%), especially since the size of the population effectively fell due to the secession, the need for imports of goods (foodstuffs, capital goods) is expected to slow. Nevertheless, imports of services and repatriation of profits by foreign companies will continue to put pressure on the current account balance. In this context, the current account deficit will remain high and FDIs, dissuaded by the political tensions, will be insufficient to cover it. Sudan is therefore likely to borrow further even though its external debt level is already unsustainable. Sudan should not be able to benefit from debt relief this year (HIPC initiative) given, in particular, the indictment of President al-Bashir by the International Criminal Court on charges of war crimes.
South Sudan’s independence also impacted adversely on public finances: drop in revenue resulting from loss of oil income (which previously represented 50% of government revenues). However, the government’s austerity programme is expected to mitigate some of this loss, over the longer term, but this will be at the cost of depressed domestic consumption. This is because VAT and many other taxes will rise under the programme, and there will also be a gradual cut in subsidies (petrol, food like sugar) until by 2014 they are abolished completely. Several expenditure items, not considered as a priority, will also be cut, except those relating to social security.
Meanwhile, the weaknesses of the banking sector, especially regarding the high proportion of non-performing loans, will be exacerbated by the country’s financial and economic difficulties, which are pushing the banks to harden and limit lending to the private sector.
Ongoing political tensions putting pressure on business environment
After South Sudan (predominantly Christian and animist) was declared independent on 9 July 2011, relations with (Muslim) Sudan deteriorated rapidly due to border disputes between the two entities (especially over the Abyei oilfields). The suspension of oil production in the South in January 2012, following Sudan’s confiscation of barrels of South Sudan’s oil transiting through the North, heightened tensions leading to the occupation of the Heglig oil region by South Sudanese troops for several days. Currently, oil talks have started again but the border issues have still not been settled. This could undermine the agreement on restarting oil production in South Sudan and tip the region into violence, especially as the leaders of both countries are themselves having to deal with strong internal political (rebel groups) and social (fuelled by poverty) tensions. Finally, this context is increasingly putting off foreign investment and aid.
