ary pressures that would reflect price trends in commodities and freight costs, COMOROS Key conditions and the possible spread of new COVID-19 vari- ants that would restrain international trav- challenges el and trigger stringent restrictions at the national and global levels, and there is a Table 1 2021 Comoros is a small and fragile island high risk of sovereign debt distress. Population, million 0.9 with significant structural challenges hin- GDP, current US$ billion 1.3 dering its development. The GDP per GDP per capita, current US$ 1444.6 capita growth rate which was, around International poverty rate ($1.9) a 19.1 0.5 percent, over the last two decades, Recent developments a 39.7 is a result of institutional and economic Lower middle-income poverty rate ($3.2) a 64.6 weaknesses, poor infrastructure provi- While Comoros has been relatively spared Upper middle-income poverty rate ($5.5) Gini index a 45.3 sion, and natural shocks. by the COVID-19, the pandemic still School enrollment, primary (% gross) b 99.5 Low domestic revenue mobilization, stem- weighed on the economy through the im- b 64.3 ming from weak administrative capacity pact of national restrictive measures on Life expectancy at birth, years as well as poor economic performance, consumption. Thus, driven by an expan- Total GHG Emissions (mtCO2e) 0.7 translated into low human and physical sionary fiscal policy and a sluggish private Source: WDI, Macro Poverty Outlook, and official data. capital. Consequently, between 2002 and consumption, the economy expanded by a/ Most recent value (2014), 2011 PPPs. b/ WDI for School enrollment (2018); Life expectancy 2018, the country’s produced physical cap- 2.4 percent in 2021. The service sector, (2019). ital per capita declined by 27.7 percent which was the main driver of the growth, while the human capital wealth per capita recovered slightly, growing by 2.8 percent increased by only 0.16 percent. Thus, hu- in 2021 in comparison to -2.2 percent in The COVID-19 is still weighing on Co- man and physical capital’s contribution to 2020. Compared to 2020, the poverty rate moros, as the economy grew below its Comoros growth has been marginal. remained stable at 39.7 percentage points Growth is primarily led by private con- in 2021. potential in 2021. Driven by an expan- sumption, and private remittances are fu- Moreover, the pandemic and its impacts sionary fiscal policy, growth is expected eling the consumption-driven growth tra- on the global supply chain fueled short- to pick up in 2022-2024. However, the jectory. On the supply side, growth is ages and the inflation rate reached 7.1 per- recovery could be constrained. The heavily driven by the service and agricul- cent (y-o-y) in December 2021 from -4.8 ture sectors while there is an important un- percent in December 2020. The price in- country, already at a high risk of debt tapped potential in the fishing and tourism crease was primarily driven by food and distress, is facing growing imbalances. industries. Realizing a sustainable and in- non-alcoholic beverage products (+12.2 In addition, Comoros will however face clusive growth would require tapping in percentage points), health prices (+7.6 per- several external headwinds. Poverty will those industries while improving human centage points) and transport prices (+5.3 decline in 2022 due to improvement in and physical capital, better leveraging the percentage points). Though, it remained diaspora potential, and improving the in- low, on average, in 2021 (1.4 percent). economic growth. The expansionary fiscal policy led to a stitutional quality. Comoros outlooks face several headwinds higher fiscal deficit (2.5 percent of GDP in related to the risks for additional inflation- 2021 from 1.0 percent in 2020). This policy FIGURE 1 Comoros / Selected macroeconomic indicators FIGURE 2 Comoros / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 40 1 70 500000 35 0 495000 60 30 -1 490000 -2 50 25 485000 -3 40 20 -4 480000 15 30 -5 475000 10 -6 20 470000 5 -7 10 465000 0 -8 2017 2018 2019 2020 2021e 2022f 2023f 2024f 0 460000 Debt (% of GDP) 2014 2016 2018 2020 2022 2024 Current Account Balance (% of GDP, rhs) International poverty rate Lower middle-income pov. rate Fiscal Balance (% of GDP, rhs) Upper middle-income pov. rate Real GDP pc Sources: National authorities, and staff estimates and forecasts. Source: World Bank. Notes: see Table 2. MPO 21 Apr 22 was characterized by an increase in trans- increased to 9.6 months of imports at economy is expected to grow at a rate of fers (+0.7 percent of GDP) and capital ex- end-September 2021, in comparison with 3.4 percent in 2023-2024 when the vacci- penditures (+4.5 percent of GDP). More- 9 months at end-2020. This improvement nation rate will increase, and if advanced over, the government kept the freight cost in the overall external position stems economies fully recover, and tourists, valuation for imports to pre-March 2021 from the Special Drawings Rights alloca- mainly the ones from the diaspora, can levels to reduce inflationary pressures. tion of US$24 million. return to Comoros for the different cycles The increased fiscal needs (13.0 percent of of Grand Marriage. GDP in 2021) stemming from this poli- A deterioration of the fiscal deficit is pro- cy was financed by external partners (10.7 jected to increase to 4.9 percent of GDP percent of GDP), including the World Outlook on the back of an increase in domestical- Bank support for the vaccine rollout. The ly financed investment. With an increase deficit was contained through the imple- The economy is projected to expand by in the import bill due to the expansion- mentation of some tax and customs ad- 2.8 percentage points in 2022 on the back ary fiscal policy, and a decline of remit- ministration reforms under the IMF Staff of an expansionary fiscal policy. This tances, a deterioration of the external po- Monitored Program. With a sluggish slow recovery also reflects difficulties in sition is projected, and the current ac- growth and expansionary fiscal policy, the service sector that would grow below count deficit is forecasted to increase to public debt increased to 24.9 percent of its potential because of structural sectoral 6.6 percent of GDP in 2022 and reach 7.0 GDP in 2021 from 22.1 percent in 2020. issues, existing COVID-19 restrictions, percent in 2023. There is a high risk of public debt distress and a lower purchasing power due to in- Against this backdrop, the poverty rate is due to the signature of a non-concessional creased inflationary pressures at the glob- expected to decrease only moderately over loan for the tourism sector. al and national levels. In fact, the Russian the next two years. By 2023, poverty is pro- Following the decrease in remittances invasion, war, and associated sanctions jected to return to its pre-COVID levels at and the increase in the import bill, Co- will impede Comoros recovery through 39.5 percent (when measured against the moros recorded a deterioration of its cur- its consequences on increased inflationary poverty line for lower middle-income rent account deficit to 3.4 percent of GDP pressures, less remittances from France countries of USD 3.2 a day per capita in in 2021, from 2.0 percent in 2020. How- which hosts a substantial share of the Co- PPP terms). Poverty rate is expected to ever, Comoros’ overall external position morian diaspora, and the resulting slow- continue to decrease to about 39.3 percent has marginally improved as reserves had er increase in the domestic demand. The in 2024. TABLE 2 Comoros / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 1.8 -0.3 2.4 2.8 3.1 3.7 Private Consumption 3.8 3.8 1.6 2.1 4.6 3.3 Government Consumption 3.5 4.1 2.3 12.1 -1.1 5.3 Gross Fixed Capital Investment -8.4 -14.4 2.5 6.2 8.1 -1.7 Exports, Goods and Services 6.8 -46.3 23.1 28.4 9.8 4.9 Imports, Goods and Services 5.7 -9.3 0.9 13.8 9.7 0.8 Real GDP growth, at constant factor prices 1.9 -0.8 2.4 2.8 3.1 3.7 Agriculture 0.9 4.3 1.6 -4.5 0.4 4.9 Industry 4.0 -5.6 2.1 6.3 3.1 3.2 Services 1.9 -2.2 2.8 5.6 4.3 3.2 Inflation (Consumer Price Index) 3.7 0.8 1.4 6.4 3.3 1.0 Current Account Balance (% of GDP) -2.4 -2.0 -3.4 -6.6 -7.0 -6.3 Fiscal Balance (% of GDP) -4.3 -1.0 -2.5 -4.9 -4.4 -2.9 Debt (% of GDP) 20.6 22.0 24.9 29.3 33.2 35.1 Primary Balance (% of GDP) -4.1 -0.8 -2.2 -4.5 -3.7 -1.9 a,b International poverty rate ($1.9 in 2011 PPP) 18.4 19.2 19.2 18.9 18.6 18.1 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 38.9 39.7 39.7 39.4 39.0 38.2 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 63.9 64.8 64.7 64.6 64.2 63.8 GHG emissions growth (mtCO2e) 3.5 2.4 2.6 3.2 3.1 3.1 Energy related GHG emissions (% of total) 42.4 42.3 42.5 43.0 43.4 43.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2014-EESIC.Actual data: 2014. Nowcast: 2015-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2014) with pass-through = 0.87 based on GDP per capita in constant LCU. MPO 22 Apr 22