interest payments to domestic revenue was estimated at 19.8 percent in 2020. Inflation SIERRA LEONE Key conditions and has remained elevated, largely in double digits, raising concerns for food security. challenges Economic growth has translated into mod- est per capita income gains because of Table 1 2021 Sierra Leone’s economy is highly depen- rapid population growth (averaging 2.1 Population, million 8.1 dent on mining and agricultural activities, percent per annum). About 80 percent of GDP, current US$ billion 4.1 making it vulnerable to external (e.g., com- the population is under the age of 35 years, GDP per capita, current US$ 504.4 modity prices and global demand) and do- making efforts to accelerate job creation a 43.0 International poverty rate ($1.9) mestic shocks (e.g., weather). Prior to the and increase access to public services (e.g., a 76.0 Ebola epidemic, mining, primarily iron healthcare and education) a critical chal- Lower middle-income poverty rate ($3.2) a 35.7 ore, accounted for 15 percent of GDP and lenge. Poverty (measured using the inter- Gini index School enrollment, primary (% gross) b 141.3 about 80 percent of merchandise exports. national poverty line of US$1.9 per day, Life expectancy at birth, years b 54.7 However, the sector has exhibited signifi- 2011 PPP) fell by 11.7 percentage points Total GHG Emissions (mtCO2e) 11.4 cant volatility in recent years, with iron ore over the last decade to 43 percent in 2018. output declining to almost zero in 2018–20. Since three-quarters of the poor live in rur- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2018), 2011 PPPs. Thus, while growth averaged 4.2 percent al areas, poverty among subsistence farm- b/ WDI for School enrollment (2020); Life expectancy over the past decade, it has fluctuated ers remains a major challenge. (2019). widely (by 10.3 percent from the mean, two-thirds of the time). In 2015, the econ- omy was hit simultaneously by a collapse After contracting in 2020, Sierra in global commodity prices and the Ebola Recent developments Leone’s economy grew by 3.1 percent in epidemic. In 2020, the COVID-19 pandem- ic also affected domestic and external de- After contracting by 2 percent in 2020, the 2021, driven mainly by agriculture and mand concomitantly. Mobility restrictions economy grew by 3.1 percent in 2021, re- mining. The fiscal deficit remained ele- adversely impacted private sector employ- flecting the easing of mobility restrictions vated, despite improvements in rev- ment and incomes, especially in urban ar- as well as fiscal stimulus and structur- enues, driven by overruns in recurrent eas, leading to a likely increase in poverty. al reform efforts. Agriculture contributed spending. With growth averaging 4.4 The authorities have struggled to restore more than half of overall growth (1.9 per- macroeconomic stability and fiscal bal- centage points) due to increased private percent during the medium-term, pover- ances since the Ebola shock. Since 2014, the sector participation in input market. Both ty is expected to return to its 2019 level budget deficit has exceeded 5.5 percent of industry and services contributed 0.6 per- by 2023, but high inflation is eroding GDP, due to low domestic revenue mobi- centage points each, reflecting a grad- real incomes and may affect the outlook. lization (average of 12.6 percent of GDP) ual recovery of mining and manufactur- and expenditure overruns (average of 22.0 ing as well as trade and tourism. On the The Ukraine-Russia crisis presents risks percent of GDP). Sierra Leone is at high demand side, growth was driven by fi- to the outlook primarily through fluctu- risk of debt distress, with debt dynamics nal consumption and gross investments ations in commodity prices. partly affected by increased reliance on ex- (mainly public investment following the pensive domestic borrowing. The ratio of resumption of capital projects). Headline FIGURE 1 Sierra Leone / Real GDP growth and sectoral FIGURE 2 Sierra Leone / Actual and projected poverty and contributions to real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 6 90 1.80 80 1.60 4 70 1.40 60 1.20 2 50 1.00 40 0.80 0 30 0.60 Agriculture 20 0.40 Industry 10 0.20 -2 Services GDP at Factor Cost 0 0.00 2011 2013 2015 2017 2019 2021 2023 -4 International poverty rate Lower middle-income pov. rate 2019 2020 2021e 2022f 2023f 2024f Real GDP pc Sources: StatSL and World Bank. Source: World Bank. Notes: See Table 2. MPO 1 Apr 22 inflation declined to 8.9 percent in March against US dollars, and 9 percent in the the level recorded in 2019 for longer than 2021, before it accelerated to 17.9 percent parallel market). However, gross external expected. The overall fiscal deficit is pro- (year-on-year) by end-December, reflect- reserves increased to US$933 million (6.1 jected to narrow to 3.0 percent of GDP by ing global food price increases as well months of imports), with the new Inter- 2024, driven by gains in domestic revenue as a combination of recovering domestic national Monetary Fund Special Draw- mobilization, expenditure rationalization, consumer demand and enduring supply ing Rights allocation (US$281 million) en- and public financial management reforms. chain disruptions. High food inflation in- hancing the country’s ability to cushion Fiscal policy would focus on protecting so- creased the share of the food insecure external shocks. cial expenditures to support human capital population from 50 percent (3.6 million) development. The current account deficit in 2015 to 57 percent (4.7 million) in is expected to narrow to 12.9 percent of 2020. The share of the population living GDP by 2024 as the recovery in the mining in poverty is estimated to have increased Outlook sector boosts export growth. during the early stages of the pandemic The outlook is subject to significant in 2020 (especially in urban areas among The economy is expected to gradually re- downside risks and uncertainties related the self-employed) by about 2 percentage cover, mainly due to mining and agricul- to the Ukraine-Russia crisis, the 2023 gen- points, before it fell marginally in 2021. ture. Real GDP growth is projected to av- eral elections, and the path of the pan- The overall fiscal deficit increased slightly erage 4.4 percent over the medium term demic. Wide fluctuations in commodity by 0.1 percentage points to 5.9 percent of (2022–24), with contributions from invest- prices due to the war in Ukraine can pose GDP in 2021, mainly due to higher-than- ments (especially in mining and agricul- both gains and losses for the economy, expected expenditure on wages, goods ture) on the demand side, and from agri- while a sharp rise in global food and fu- and services, and subsidies for electricity culture, tourism, construction, and mining el prices poses a risk of higher inflation generation. The expenditure overruns and manufacturing on the supply side. and potentially increased food insecuri- were aggravated by inflation as the price Headline inflation is expected to remain ty. Higher domestic inflation can cause of goods and services rose. However, rev- elevated in the coming years and decline expenditure overruns, while higher fu- enue collection improved remarkably, gradually to single digits as domestic food el prices, if not passed through to con- and tax revenue reached 15.3 percent of production increases by 2024 and offsets sumers, can put pressure on the gov- GDP, up from 13.8 percent of GDP in the the effect of high international prices. A ernment’s subsidy bill. On the upside, a previous year, due in part to one-off min- sustained increase in fertilizer and fuel sharp increase in the price of metals such ing revenues. Public debt increased from prices in 2022 due to the ongoing Ukraine- as iron ore can: (i) significantly affect the 76.3 percent in 2020 to an estimated 76.9 Russia conflict is likely to hamper agricul- mining outlook; (ii) present terms of trade percent of GDP in 2021, mainly because tural production. While strong overall gains; (iii) bolster the demand for Sierra of new multilateral borrowing. The cur- growth may reduce poverty, headwinds Leone’s iron ore as the world searches for rent account deficit widened with the re- from inflation, including the rise of fuel alternative sources; and (iv) increase gov- covery in domestic demand and the de- and fertilizer prices, may dampen ernment revenue from mining. preciation of the Leone (by 11 percent progress, keeping the poverty rate above TABLE 2 Sierra Leone / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 5.3 -2.0 3.1 3.9 4.4 4.8 Private Consumption 4.3 4.3 4.2 6.2 4.9 5.9 Government Consumption 5.1 2.7 0.1 0.0 15.7 0.9 Gross Fixed Capital Investment -34.2 -4.1 7.6 9.8 13.1 12.4 Exports, Goods and Services -1.6 -9.8 40.5 18.0 9.5 10.1 Imports, Goods and Services -7.0 7.5 18.4 12.4 13.1 7.8 Real GDP growth, at constant factor prices 5.3 -2.0 3.1 3.9 4.4 4.8 Agriculture 5.4 1.6 3.7 3.5 3.6 3.6 Industry 10.9 -7.1 3.8 9.4 4.7 4.7 Services 3.8 -5.9 2.0 2.9 5.5 6.7 Inflation (Consumer Price Index) 14.8 13.5 11.9 14.2 12.1 10.9 Current Account Balance (% of GDP) -15.3 -7.0 -13.7 -15.9 -13.9 -12.9 Net Foreign Direct Investment (% of GDP) 7.9 3.4 8.5 8.0 6.8 6.2 Fiscal Balance (% of GDP) -3.1 -5.8 -5.9 -5.0 -4.2 -3.0 Debt (% of GDP) 70.9 76.3 76.9 76.8 76.8 75.3 Primary Balance (% of GDP) -0.4 -2.7 -2.8 -2.0 -1.4 -0.1 a,b International poverty rate ($1.9 in 2011 PPP) 41.1 43.4 42.8 41.7 40.3 38.8 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 74.7 76.3 75.9 75.2 74.2 73.1 GHG emissions growth (mtCO2e) 3.1 1.4 3.0 3.0 2.7 2.8 Energy related GHG emissions (% of total) 15.1 14.6 14.5 14.4 14.3 14.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2011-SLIHS and 2018-SLIHS. Actual data: 2018. Nowcast: 2019-2021. Forecasts are from 2022 to 2024. b/ Projection using point-to-point elasticity (2011-2018) with pass-through = 0.87 based on GDP per capita in constant LCU. MPO 2 Apr 22