Economic analysis
Sudan

Sudan

Population 38.4 million
GDP per capita 2119 US$
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Synthesis

major macro economic indicators

  2014 2015  2016 (f) 2017 (f)
GDP growth (%) 1.6 4.9 3.1 3.7
Inflation (yearly average) (%) 36.9 16.9 15.0 17.5
Budget balance (% GDP) -1.4 -1.9 -2.1 -2.2
Current account balance (% GDP) -7.0 -7.9 -5.9 -5.0
Public debt (% GDP) 76.8 72.9 62.8 56.7

 

(e) Estimate (f) Forecast

STRENGTHS

  • Strategic location between the Middle East and West Africa
  • Relative stabilisation thanks to the oil and gas agreement with South Sudan
  • Reforms being undertaken in cooperation with the IMF

WEAKNESSES

  • Loss of oil and gas revenues following independence of South Sudan
  • Unsustainable external debt
  • Lack of investment in infrastructure
  • Significant shortcomings in the business climate and governance
  • Insecurity
  • High levels of unemployment (especially among the young) and poverty

RISK ASSESSMENT

 

Moderate growth, dependent on the agricultural sector

A considerable amount of work has been carried out aimed at improving macro-economic stability and restoring growth since the shock triggered by the secession of South Sudan in 2011. The adjustments made have helped bring the rise in the public deficit under control, to reduce inflation and sustain the recovery. There are still major imbalances, linked with the loss of three-quarters of its oil and gas exports (and the corresponding budget revenues), which continue to limit the growth potential, alongside the difficult business climate, the lack of exchange rate flexibility, overindebtedness, internal conflicts and US sanctions.

In this context, with the fall in the prices of its exported products, growth remains limited. Activity slowed in 2016 with the decline in agricultural output. In 2017, better crop yields, thanks to increased rainfall, and the resulting effect on private consumption, should drive growth upwards. The slight recovery in oil prices is also likely to lead to an increase in public consumption. After three years of recession, a slight upturn in the oil and gas GDP is likely.

Inflation will be higher in 2017, reflecting the weakness of monetary control and the rises in the price of oil (of which the country is now a net importer) and food products.

 

Difficulties eliminating the twin deficits

In 2016, the current account deficit contracted slightly as earnings from its gold exports increased, driven by higher prices (Sudan also exports livestock, oil and sesame seeds). The substantial imbalance in its external accounts will continue in 2017, even if there is a slow recovery in oil exports. Foreign investments will not cover the current account deficit, meaning once again that the country will require substantial foreign aid. This would enable it to avoid a further reduction in its currency reserves, which are at a low level (approximately 1 month of imports). In addition, because of the inflexibility of the exchange regime, the exchange rate is around 50% overvalued in real terms.

The budget deficit has widened as a result of declining oil and gas revenues (including transfers from South Sudan covering the use of Sudanese pipelines and compensation for the loss of the oil fields), linked with the fall in crude oil prices. Despite the efforts to bring current account expenditure under control and boost tax revenues, which represent a lower proportion of GDP than the average for poor countries, the public deficit remains at a level that requires recourse to central bank financing.

Sudan remains over-indebted. The public and external debt ratios are high and most of the external debt is in arrears. This means the country has to rely on finance in the form of grants and concessional loans and continue working towards being granted debt relief as part of the HIPC initiative.

An extremely difficult political situation

Twenty-six years after the coup d'Etat that brought the current president to power, Omar al-Bashir, supported by the National Congress Party, was re-elected for a second five-year term in the presidential election in April 2015. Both the presidential and parliamentary elections, held at the same time, were boycotted by the opposition and the results have been disavowed by Western governments. Periodic popular protests, fed by a lack of any political change and by austerity, and often brutally suppressed, are however unlikely to destabilise the regime, and the political opposition remains divided. In the longer term, the issue of the presidential succession will arise, with no heir identified.

Whilst the shared economic challenge relating to the production and shipping of oil led to cooperation between Sudan and South Sudan, the question of the status of several border regions (Abyei, South Kordofan and Blue Nile) continues to cause strain in the relations between the two countries.

Violent conflict broke out in Darfur, in Western Sudan, in 2003 and continues to this day, between insurgents linked with ethnic minorities and the ruling authorities, controlled by the Arab majority. Since then, the UN has estimated that the fighting between governmental forces and the rebels has led to at least 300,000 deaths and 2.5 million displaced persons.

Sudan has been under a US trade embargo since 1997 following accusations that the Sudanese authorities were supporting violent Islamist groups, and subsequently following condemnation for its actions in the Darfur conflict. Washington extended these sanctions by one year in November 2016 but has not ruled out the lifting of these if the country is making progress.

Last update : January 2017

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