POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE GUINEA BISSAU Prepared by Sering Touray (Economist, EAWPV) and Nalourgo Kanigui Yaya Yeo (Consultant, EAWPV) © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU 3 POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE GUINEA BISSAU 1 Poverty increased by 2.8 percentage points between 2018 and 2021. Trends in poverty between 2018 and 2021 have largely gone in the same direction in urban and rural areas but remain higher in rural areas. Although overall consumption growth contracted in both rural and urban areas, rural households experienced a slightly larger contraction (6.6 percent on average) than urban areas (3.3 percent on average). However, growth in consumption is observed among the poorest households especially in urban areas – with annualized growth rates of up to 6 percent for households in the 9th centile of the distribution. In rural areas on the other hand, annualized consumption growth is negative across most of the distribution- but more (less) pronounced for the richest (poorest) households. As a result, Guinea Bissau recorded a slight decline in consumption inequality during the period – driven by larger reduction in inequality in urban areas- mainly Bissau. COUNTRY CONTEXT, GLOBAL SHOCKS, AND 1 Additionally, cashew nuts, which account for 90 percent RECENT TRENDS IN GDP GROWTH of merchandise exports and a major source of income for over 70 percent of households; have been experiencing Guinea-Bissau experienced volatile economic growth declining prices and volatile international demand since over the past decade. Economic growth rebounded in 2021 2018. Furthermore, the cessation of shipping operations before slowing down in 2022. Real GDP per capita reached by Maersk Line in 20212 resulted in a freight container 6.4 percent in 2021 from 1.5 percent in 2020; before slowing monopoly and a 35 percent increase in export tariffs down to 3.5 percent in 2022 and is expected to have during the 2023 season. As a result, the volume of exports further slowed down to 2.8 percent in 2023. The economy has declined- from 68 percent of production in 2022 to continues to be structurally vulnerable to terms-of-trade about 65 percent in 2023, exposing the economy to further shocks and climatic risks. Recovery from the COVID-19 vulnerabilities. Much of the un-exported cashew nut is pandemic has been constrained by additional shocks- smuggled through Senegal and Guinea as part of efforts notably spillover effects of the war on Ukraine resulting in by farmers to explore arbitrage opportunities. disruptions in global supply chains and rising food prices. 1 Prepared by Sering Touray (Economist, EAWPV) and Nalourgo Kanigui Yaya Yeo (Consultant, EAWPV) 2 https://www.maersk.com/news/articles/2021/09/03/maersk-to-cease-operations-in-guinea-bissau 4 POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU Figure 1. Poverty incidence and GDP per capita, 2018-2022 54 51 7.0% 50.5 (constant market prices) GDP per capita growth Poverty incidence (%) 48 47.7 5.0% 45 42 3.0% 39 36 1.0% 2018 2019 2020 2021 2022 Poverty GDP per capita Source: World Bank calculations based on EHCVM 2018/19, EHCVM 2021/22 and data portal (https://data.worldbank.org/). Note: Poverty estimates in 2018 and 2021 used EHCVM 2018/19 and EHCVM 2021/22. TRENDS IN MONETARY POVERTY 2018/19-2021/22 increasing intensity of poverty in Guinea Bissau during the period. Recovery from the COVID-19 pandemic has Poverty continues to be widespread in Guinea Bissau- been constrained by additional shocks- notably spillover increasing by 2.8 percentage points (equivalent to over effects of the war on Ukraine resulting in disruptions in 80,000 additional poor) between 2018 and 2021. Data global supply chains and rising food prices. from the 2018/19 and 2021/22 EHCVM surveys showed that poverty increased from 47.7 percent in 2018 (equivalent Trends in poverty between 2018 and 2021 have largely to about 0.802 million poor persons) to 50.5 percent gone in the same direction in urban and rural areas but in 2021 (equivalent to over 0.886 million poor)3. This is remain higher in rural areas. In rural areas more than equivalent to over 80,000 additional poor. Over the same half of the population are poor. The incidence of poverty period, other measures of poverty increased in Guinea increased by 4.1 percentage points over the period to Bissau. The poverty gap (which measures the extent to reach 67 percent in 2021. In the capital city, Bissau poverty which individuals on average fall below the poverty line) remained relatively unchanged at 21 percent; but in other increased from 13.7 percent in 2018 to 15.2 percent in 2021. urban areas, poverty increased by 3.3 percentage points Similarly, the poverty severity index (which puts more between 2018 and 2021 to reach 42 percent. Poverty is weight on the poorest households, measured by squaring most severe in rural areas as shown by higher and larger the poverty gap) has also increased, from 5.4 to 6.2 over increases in both poverty gap and severity indicators over the same period. The increase in these indicators illustrate the period. Therefore, not only is poverty more of a rural 3 A new national poverty line was constructed in 2021/22 instead of using inflation to update the 2018/19 line because the fixed CPI basket doesn’t allow for any substitution effects, which could overstate poverty rates given the price shocks experienced between 2018 and 2021. The poverty line is constructed in two stages. A basket of goods of the country’s food consumption that allows an individual to satisfy his daily nutritional needs of 2,300 kilocalories is retained and valued to provide a food poverty line. The non-food-poverty line is a portion of the non-food consumption expenditure of households located around the food poverty line. The sum of the two poverty lines gives the national poverty line. The timing of the implementation of the 2018/19 and 2021/22 surveys was not identical. In addition, the 2021/22 welfare aggregate excludes hospitalization expenditures and the rent imputation method for rural areas differs from 2018/19. POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU 5 Figure 2. Changes in monetary poverty indicators 2018/19 - 2021/2 by area of residence a. Poverty incidence b. Poverty gap c. Poverty severity 80 25 10 9.0 67.0 21.6 70 62.9 19.0 20 7.7 60 8 47.7 50.5 15.2 6.2 50 42.1 15 13.7 5.4 38.8 6 40 11.3 4.3 10.1 10 3.6 30 21.3 21.0 4 20 4.7 4.2 1.5 5 2 1.2 10 0 0 0 National Bissau Other Urban Rural National Bissau Other Urban Rural National Bissau Other Urban Rural National Bissau Other Urban Rural National Bissau Other Urban Rural National Bissau Other Urban Rural 2018 2021 2018 2021 2018 2021 Source: World Bank calculations based on EHCVM 2018 and 2021 phenomenon in Guinea Bissau, but the rural poor are also was FCFA 491. However, during the same period, average furthest away from the poverty line compared to their farmgate prices for a kilo was almost FCFA 200 lower than counterparts in urban areas. the average export price - FCFA298 per kilo. Furthermore, although recent data shows rising cashew prices, the gap This is partly because the rural economy continues to be between export and farmgate cashew prices has increased dominated by low productive agriculture – mainly raw reaching FCFA356 per kilogram in 2020 constraining cashew nut production. Over 70 percent of households income growth of farmers and reducing their ability to rely on cashew production in Guinea Bissau- for whom escape poverty. income from sale of cashew nuts is an important source of livelihood. Despite improvements in cashew yields The rural-urban disparities in wellbeing may also have (supporting growth in agriculture from 4.3 percent in 2018 been further exacerbated by the faster post-COVID-19 to 5.4 percent in 2021), cashew farmgate prices remain recovery of the services sector – which employs most of lower than export prices due to governance and market the urban households. For instance, the services sector failures; thereby undermining the pace of rural income grew by 7.5 percent in 2021- from 0.35 in 2020 and 3.2 growth and progress in reducing rural poverty . Between 4 in 2018; mitigating the adverse effects of the COVID-19 2000 and 2020, official government estimates indicate pandemic thereby resulting in a smaller increase in that the average export price of a kilo of cashew nuts poverty in urban areas relative to rural areas. 4 The recent World Bank Systematic Country Diagnostic (SCD) update- September 2023, discusses in detail the extent to which lack of inclusiveness and low rural productivity continue to constrain growth, inclusion and sustainability- https://documents.worldbank.org/en/publication/documents-reports/docu- mentdetail/099110323163018763/bosib0f7d3f3e401e0a2a3015c9e962aff5 6 POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU Figure 3. Poverty Trends by region: 2018/19-2021/22 a. Poverty Trends by region: 2018/19-2021/22 b. Changes in poverty incidences by region: 2018/19-2021/22 20.0 80.0 68.0 72.1 15.0 12.3 14.0 63.8 62.2 64.4 60.0 61.1 58.8 54.3 58.9 53.3 61.0 53.5 54.0 52.6 10.0 8.3 47.3 5.2 42.0 5.0 2.1 40.0 0.0 21.0 21.0 -0.2 20.0 --5.0 -2.3 -5.6 --10.0 -7.5 0.0 Bafata Biombo Bolama/Bijagos Cacheu Gabu Oio Quinara Bissau Tombali Bafata Biombo Bolama/Bikagos Cacheu Gabu Oio Quinara Bissau Tombali 2018/19 2021/22 c. Number of poor by region d. Changes in the number of poor by region 2018/19-2021/22 40,000 36,874 250,000 32,527 30,000 200,000 20,000 13,182 150,000 10,000 8,154 1,150 3,873 3,577 100,000 0 -1,123 50,000 -10,000 -10,194 -20,000 0 Bafata Biombo Bolama/Bijagos Cacheu Gabu Oio Quinara Bissau Tombali Bafata Biombo Bolama/Bikagos Cacheu Gabu Oio Quinara Bissau Tombali 2018/19 2021/22 Source: World Bank staff calculation based on EHCVM 2018/19 and 2021/22 Regional disparities in monetary poverty trends persist in poverty between 2018 and 2021 was recorded in the with the highest incidence of poverty observed in the regions of Gabu and Biombo where poverty increased by regions of Oio, Gabu Quinera. The region of Oio continues 14 and 12.3 percentage points during the period (Figure to record the highest incidence of poverty with 72 percent 3b)- resulting in Gabu becoming the region with the of the population being poor in 2021- about 8.3 percentage second highest incidence of poverty as of 2021. Despite point increase from its 2018 levels (see Figure 3a and overall increases in poverty, the regions of Cacheu, 3b). The lowest incidence of poverty is reported in the Bolama/Bijagos, and Bafata experienced reductions Bissau region where 21 percent of the population are poor of 7.5, 5.6 and 2.3 percentage points respectively in the – relatively the same rate in 2018. The largest increase incidence poverty over the period. POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU 7 Map 1. Poverty Indicators by Region (EHCVM 2021) a. Poverty Rate b. Share of Poor Population Source: World Bank calculations based on EHCVM 2021/22. A new national poverty line was constructed in 2021 instead of using inflation to update the 2018 line because the fixed CPI basket doesn’t allow for any substitution effects, which could have otherwise overstated poverty rates given the price shocks experienced between 2018 and 2021. More than half (55 percent) of the poor are concentrated INEQUALITY AND SHARED PROSPERITY 5 in the regions of Oio, Gabu and Bafata. In addition to having a high incidence of poverty, the regions of Oio and What was the annualized growth in per capita household consumption across the distribution? Gabu are home to 23.7 and 17.1 percent of the poor people in Guinea Bissau respectively (Map 1a and 1b). Both While all households suffered reductions in per capita regions recorded additional over 30,000 poor persons consumption between 2018 and 2021, the richest each in 2021. Furthermore, the region of Bafata has the households experienced the largest reduction. According third highest share of the poor population (14.6 percent) to the growth incidence curve shown in Figure 4, between despite a 2.3 percentage point decline in poverty during 2018 and 2021 the annualized growth in consumption the period. Similarly, Bissau which has a low incidence per capita declined by 2.5 percent on average for the of poverty, has a slightly higher share of the poor -11.5 population. The poorest households (bottom 40 percent percent of the poor. In contrast, the decline in poverty of the distribution) experienced a slightly lower decline of in the regions of Cacheu and Bolama/Bijagos resulted 1.5 percent per year. The richest households on the other in over 10,000 and 1,000 fewer poor persons respectively hand experienced much steeper decline – for instance, (Figure 3c and 3d). 5 The results presented in this section differ from those presented in the Poverty and Equality Brief, because they are based on the measure of consump- tion used for calculating poverty at the national poverty line, rather than at the international line. The main differences are that this aggregate adjusts for differences in the cost of living across the country and uses the ratio of the two national poverty lines to adjust for the increased cost of living between the two survey rounds, instead of the official CPI 8 POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU Figure 4. Growth Incidence Curve by Geographical Location a. National b. Urban c. Rural 0.0% 7.0% 5.0% -5.0% 4.0% 0.0% 1.0% -10.0% -2.0% -5.0% -15.0% -5.0% -8.0% -10.0% -20.0% -11.0% -14.0% -15.0% -25.0% -17.0% -30.0% -20.0% -20.0% C1 C11 C21 C31 C41 C51 C61 C71 C81 C91 C1 C11 C21 C31 C41 C51 C61 C71 C81 C91 C1 C11 C21 C31 C41 C51 C61 C71 C81 C91 National (constant price 2018) Urban (constant price 2018) Rural (constant price 2018) Average growth (national) Average growth (urban) Average growth (rural) Source: World Bank calculations based on EHCVM 2018 and 2021 the richest households (top decile of the distribution) hand, annualized consumption growth is negative across experienced a decline of up to 20 percent during the same most of the distribution- but more (less) pronounced for period. This is likely driven by more steady growth in the the richest (poorest) households. This is further reflected agricultural sector over the years (averaging 4.6 percent in the large contraction of consumption of the poorest between 2018-2021); than industry and service sectors 40 percent of households - especially in rural areas (1.96 which remained volatile and respectively averaged 4.4 percent reduction) relative to urban areas (0.25 percent and 4.2 percent driven by a strong rebound in 2021. decline). This disparity in consumption growth is reflected in the ‘shared prosperity premium’ which measures the Across space, notable differences in the patterns of extent to which economic growth is inclusive by focusing consumption growth emerge between the rural and urban on consumption growth among the poorest of the poor. Overall, consumption growth contracted in both rural population relative to the whole population. The shared and urban areas – with rural households experiencing a premium shows that growth was less inclusive in rural than slightly larger contraction (6.6 percent on average) than in urban areas - 0.79 percent compared to 1.98 percent in urban areas (3.3 percent on average). However, positive urban areas; and 0.96 percent at the national level. This growth in consumption is observed among the poorest trend implies that larger decline in consumption growth households in urban areas especially– with annualized among rural households (where the incidence of poverty growth rates of up to 6 percent for households in the is also higher) constrained poverty reduction resulting in 9th centile of the distribution. In rural areas on the other an overall increase in poverty. POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU 9 Figure 5. Gini (consumption) inequality index, 2018-2021 40 31.6 29.9 30.9 10 27.5 28.1 27.8 27.2 25.5 20 10 0 National Bissau Other Urban Rural 2018 2021 Source: World Bank staff calculation based on EHCVM 2018 and EHCVM 2021. What are the trends in Gini, share of top and bottom in Bissau, where it declined 3.4 Gini points (from 30.9 to quintiles in total consumption, and in ratio of percentiles 27.5), compared to 0.3 and 1.7 Gini Points decline in other of consumption distribution? urban areas; and in rural areas respectively. Positive consumption growth among the poorest urban A look at the consumption ratio between the dwellers is consistent with a decline in inequality. Guinea wealthiest and poorest quintiles overall and across Bissau recorded a slight decline in consumption inequality space also illustrates declining inequality – driven by between 2018/19 and 2021/22, as measured by the Gini lower inequality in the Bissau area. For instance, the coefficient, which decreased from 31.6 to 29.9. The trends consumption ratio in Bissau declined from 4.55 to 3.81 by residence area show that the decrease in consumption between 2018/19 and 2021. In rural areas, it declined inequality was more pronounced in urban areas- mainly marginally from 3.80 to 3.53. In other urban areas, it Table 1. Consumption inequality indicators in Guinea Bissau 2018/19 – 2021/22 Share of population Consumption as a percentage Gini index Consumption ratios between top of total and bottom quintiles 2018/19 2021/22 2018/19 2021/22 2018/19 2021/22 2018/19 2021/22 National 31.6 29.9 4.7 4.4 Bissau 27.9 27.8 39.8 40.3 30.9 27.5 4.5 3.8 Other urban 14.7 14.8 14.4 15.1 28.1 27.8 4.0 4.0 Rural 57.3 57.4 45.8 44.6 27.2 25.5 3.8 3.5 Source: World Bank staff calculation based on EHCVM 2018/19 and 2021/22 10 POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU Figure 6. Trends in monetary poverty using the $2.15 (PPP2017) international poverty line by area of residence, 2018 - 2021 a. Poverty headcount b. Poverty gap c. Poverty severity 40.7 25 22.3 14 12.6 40 33.6 18.2 20 12 10.2 30 26.0 14.2 10 15 7.9 21.7 11.7 8 6.5 20 10 6 10 5.6 6.0 2.8 3.1 4 5 1.4 1.7 2 0 0 0 2018 2021 2018 2021 2018 2021 Urban Rural National Source: World Bank staff calculation based on EHCVM 2018/19 and 2021/22 using the international poverty line of US $2.15 per person per day in 2017 PPPs. increased slightly from 4.0 to 4.02- indicating a higher poverty line of $2.15 and $3.65 per person per day in 2017 level of inequality in other urban areas and a more PPP. equitable distribution in rural areas Consistent with the findings using the national poverty BENCHMARKING POVERTY TRENDS VERSUS line, between 2018 and 2021, Guinea Bissau experienced REGIONAL AND STRUCTURAL PEERS a 4.3 percentage point increase in poverty based on the International Poverty Line of US$2.15 per person As the second EHCVM 2021/22 was fielded in 8 WAEMU per day- from 21.7 percent to 26 percent (Figure 6). The member states,6 it is possible to assess the evolution increase in poverty is more pronounced in rural than in of poverty from 2018 to 2021 across these countries, urban areas- where the incidence, gap and severity of leveraging that the two waves of the WAEMU for the 8 poverty is higher. The combination of agricultural growth states are mostly comparable as they use the similar and high food prices7 is expected to have left poverty questionnaires, survey methodology and poverty unchanged between 2022 and 2023 at about 26 percent, measurement approach. To compare the evolution of with population growth implying over 10,000 additional poverty across countries we rely on the international poor people. A rebound in the agriculture sector will 6 Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo completed the first harmonized household survey across WAEMU countries, the “Enquete Harmonisee sur Conditions de Vie des Menages” EHCVM 2018/19. The second round of EHCVM, the EHCVM 2021/22 has been completed in July 2022. This second round is fully comparable with the EHCVM 2018/19, despite some minor changes. 7 Inflation remained high at 8 percent (y/y) in 2023, from 7.9 percent in 2022, driven by food and energy inflation. This followed an average of 1 percent between 2015 and 2020. POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU 11 Figure 7. Recent trends and outlook in growth and international Poverty outlook, 2022-2026 70.0 3 60.0 2.5 50.0 Real GDP per capita growth 2 40.0 Poverty rate 1.5 30.0 1 20.0 10.0 0.5 0.0 0 2022 2023 2024 2025 2026 Extreme Povert Rate (US$2.15) Poverty Rate (US$3.65) Real GDP per capita growth Source: World Bank calculations based on EHCVM 2018/19, EHCVM 2021/22 using the international poverty lines of US$2.15 and US$3.65 per person per day in 2017 PPPs and data portal (https://data.worldbank.org/). Note: Poverty estimates in 2018 and 2021 used EHCVM 2018/19 and EHCVM 2021/22. Poverty rates in 2019-2020 and 2022-2026 correspond to the recent Macro Poverty Outlook Datasheet from SM24. partly drive the poverty rate to decline to 25.4 percent peers experienced moderate reduction in poverty. For in 2024. Further progress is expected to be supported instance, Benin experienced substantial decline in their by lower food prices reducing poverty to 24.1 percent poverty rates, with a decline of 7.4 percentage points. Cote in 2025, lifting over 15,000 out of poverty, and reaching d’Ivoire, starting with a lower poverty rate of 11.5 percent, 22.6 percent by 2026. Household purchasing power will successfully reduced it by 1.8 percentage points, bringing improve with higher cashew prices and lower food prices, it down to 9.7 percent in 2021/22. This reduction enabled benefiting the poorest who spend a higher share of their Cote d’Ivoire to achieve the lowest international poverty income on food. rate among its peers, surpassing Senegal. Precisely, Senegal held the position for the lowest rate in 2018/19 Compared to some its peers in the WAEMU region (Figure but a slight increase in its poverty rate from 9.2 percent 7), Guinea Bissau’s poverty rate is relatively high. As of to 9.9 percent made the country fall behind Cote d’Ivoire. 2021, Guinea Bissau’s poverty rate is only lower than the rate in Niger and Togo. Additionally, out of the eight Compared to its Structural Peers8, Guinea Bissau’s poverty countries in the region, Guinea Bissau is one of the rate (based on the US$2.15 International Poverty Line) is three with an increase in poverty during the period- the almost 10 percentage points higher when compared to second highest increase in the region – behind Mali’s The Gambia’s 2020 rate; and about 40 percentage point 5.7 percentage point increase. In contrast, some of its lower than Central African Republic’s 2021 rate. 8 Structural peers are defined as fragile countries that have similar structural characteristics (population, GDP per capita, contribution of agriculture to economy, life expectancy, trade composition, and government revenue) to Guinea-Bissau. This group includes Burundi, Central African Republic, The Gambia, and Sierra Leone. For the purpose of this note, we only select countries with recent poverty estimates on PIP. 12 POVERTY, SHARED PROSPERITY, AND EQUITY UPDATE – GUINEA BISSAU Figure 8. International Extreme Poverty Rate ($2.15 & $3.65, PPP2017), 2018-2021 $2.15 per person per day (2017PPP) $3.65 per person per day (2017PPP) Benin 70 100 65.7 Côte d’Ivoire 61.9 90 60 85.8 Guinea Bissau 83.1 80 81.2 80.8 Mali 50 50.9 50.6 70 Niger 60 60.2 Senegal 40 56.9 58.8 56.8 56.1 53.2 Togo 50 48.2 47.0 The Gambia 30 28.4 40 39.7 (2015, 2020) 26.6 38.4 26.0 37.8 36.3 Central African Republic 21.7 (2008, 2021) 20.8 30 20 20.1 17.2 15.2 13.4 20 12.7 11.5 10 9.9 9.2 9.7 10 0 0 2018 2021 2018 2021 Source: World Bank staff calculation based on EHCVM 2018/19 and 2021/22 using the international poverty line of US $2.15 per person per day in 2017 PPPs. For The Gambia (2015 and 2020) and Central African Republic (2008 and 2021) values from PIP were used.