| Imagery Source: The Blue Diamond Gallery |
| Information Source: African Development Bank |
| Recent macroeconomic and financial developments |
| Sierra Leone’s economic growth slowed from 3.5% in 2022 to 2.6% in 2023 as Russia’s invasion of Ukraine triggered rapid increases in commodity prices. Growth was driven by higher mining and agribusiness exports on the demand side and by iron ore production and recoveries in agriculture, manufacturing, and tourism sectors on the supply side. Inflation accelerated from 27% in 2022 to 46.6% in 2023, driven by food and fuel prices, depreciation of the Leone, and supply-side constraints. The Bank of Sierra Leone tightened its monetary policy, raising the policy rate from 18% in 2022 to 22.25% in December 2023. |
| The fiscal deficit narrowed from 9.6% of GDP in 2022 to 5.8% in 2023. The public debt-to-GDP ratio declined from 98.8% in 2022 to 90.5% in 2023 due to the lower primary deficit. The current account deficit narrowed from 8.3% of GDP in 2022 to 6.1% in 2023, reflecting increases in exports and grants. The current account deficit was financed by the financial account. Gross foreign reserves stood at $432.9 million in October 2023 (3 months of import cover). The depreciation of the Leone moderated from 39.1% in 2022 to 17.2% in 2023 as administrative barriers were lifted in the foreign exchange market. Nonperforming loans fell from 14.8% of gross loans in 2021 to 11.6% in 2022 against a regulatory limit of 10%. The capital adequacy ratio declined from 39.8% in 2021 to 35% in 2022. |
| The poverty headcount ratio was 56.8% in 2018, and the extreme poverty rate was 25% in 2023. Youth unemployment was 10% in 2022, but underemployment is much higher. |
| Outlook and risks |
| Growth is projected to improve to 4.7% in 2024 and 5.2% in 2025, driven by the mining sector and recovery in agriculture, manufacturing, construction, and tourism. Inflation is projected to decline to 33.6% in 2024 and 20.2% in 2025, as external shocks subside. The fiscal deficit is projected to narrow to 2.8% of GDP in 2024 and 2.4% in 2025, due to higher tax revenue. The current account deficit is expected to narrow to 4.2% of GDP in 2024 and 2.1% in 2025, as official and private grants increase. Downside risks to the outlook include the possibility of a global economic recession, the continuation of Russia’s invasion of Ukraine, and declining international financial assistance. Risk mitigation measures could include boosting domestic revenue mobilisation, reprioritising spending to create fiscal space, and accelerating reforms to improve economic diversification, accelerate structural transformation, and increase resilience to recurring external shocks. |
| Reform of the global financial architecture |
| Sierra Leone has not made progress in structural transformation. Agriculture grew from 47% of GDP in 2003 to 60% in 2022, while its employment share dropped from 66.5% to 43%. Industry declined from 10% of GDP in 2003 to 7% in 2022, while its employment share rose from 6.2% to 12%. Services contracted from 37.6% of GDP in 2003 to 29% in 2022, while its employment share expanded from 27% to 45%. The country needs more investment in infrastructure and human capital to foster industrialisation and structural transformation. The government has ramped up investments in power, nearly doubling the installed electricity generation capacity to 253 megawatts in the past five years. To finance structural transformation, Sierra Leone needs to focus on domestic resource mobilisation and governance of its natural resources. It also needs to leverage international development assistance through reform of the global financial system. To reduce debt vulnerabilities in the short term, the government should prioritise grants and concessional loans and improve the business regulatory environment to attract foreign direct investment. In the long term, the government needs to develop domestic capital markets, enhance trade, and deepen regional integration. |
| For the full document, click the link below |
| Sierra Leone: Economic Outlook and GDP |
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