The Gambia’s Economic Situation: Good or Bad?

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Analysing the World Bank Report on The Gambia’s Economy “Gambia Economic update – Spring 2024: Jumpstarting sustained and inclusive  ”.

According to the latest World Bank report, Gambia’s economic activity increased in 2023 amid continued global challenges. Real GDP growth accelerated by 5.3% in 2023 (2.7% in per capita terms), from 4.9% (2.4% in per capita terms) in 2022. On the supply side, growth was mainly supported by improved agricultural and industrial production. The increase in agricultural growth was primarily attributed to a good rainy season, improved agricultural practices using improved seeds, increased fertiliser subsidies, and increased investment in projects by international partners.

This report has sparked wide debate on social media with commentators questioning whether the effects of the reported economic growth on farmers and Gambians in general are grounded in the current economic realities of the Gambia.

Gross Domestic Product (GDP) is a widely used indicator to measure a country’s economic performance. However, it has significant limitations when assessing the standard of living and the population’s quality of life. In the context of The Gambia, these limitations are particularly pronounced.

Heavy Investment in Capital Projects

In recent years The Gambia government has been focusing on capital projects, such as infrastructure development, investment in capital projects can inflate GDP figures without necessarily improving the everyday lives of most citizens. While these projects might contribute to economic growth, they often do not address immediate social needs. For instance, constructing Roads, bridges, Flyovers and VVIP airport terminals can boost GDP but might not directly improve the average Gambian’s healthcare, education, or job opportunities.

 Disparity Between GDP Growth and Quality of Life

Income Inequality: High GDP growth can mask significant disparities in income distribution. In The Gambia, a small proportion of the population may benefit disproportionately from economic activities, while most remain impoverished. This growing income inequality means that increases in GDP do not translate into better living standards for all.

According to the World Bank Report, The Gambia’s economic growth has been moderate partly due to low productivity growth per worker and low productive capacity utilisation. Gross capital formation has increased over the last decade, but capital accumulation per worker remains weak. Investments have not translated into a proportionate increase in capital available per worker, possibly due to high population growth or misallocation of capital. The reversal of productivity gains since 2020 can be attributed to macroeconomic headwinds due to global shocks, highlighting a fundamental challenge in The Gambia’s economic structure (World Bank Report)

According to the World Bank, the Gambia needs a new growth model to promote sustained and inclusive growth.

Many Gambians face unemployment or underemployment despite investments in capital projects. This disconnect between economic growth and employment opportunities indicates that GDP growth is not creating the necessary jobs for a better quality of life.

The Report highlighted that the country remains trapped by low productivity and the lack of transformative structural change, hampering job creation and inclusive growth. The consolidation of the democratic transition offers an opportunity to transform the growth model from reliance on low-value-added tourism to a dynamic private sector that provides more economic opportunities to all Gambians, especially the youth (World Bank Report).

Health and Education

Quality of life is closely linked to access to healthcare and education. Public investment in these critical sectors in The Gambia often lags, resulting in poor health outcomes and low educational attainment. These factors are not adequately captured by GDP figures.

According to the report: “Across households, poorer households report longer distances to health and education facilities. Given that these facilities are important inputs for human capital— and, as such, outcomes later in life—this is suggestive evidence that the poorest households do not just lack access to services that richer households have access to, they may also face persistent disadvantages later in life due to this lack of access”. This is a clear indication that GDP growth is not the best measure of quality of life.

“Poor households spend nearly 90 per cent of their budget on food, education, and housing and remain highly vulnerable to food price increases. Overall household expenditure is lower among rural than urban households, as well as among poorer than richer households (Figure 50). A closer look at the composition of household expenditure shows that poorer households spend more on food than richer households and those in the urban areas. However, the onset of the pandemic in the second quarter of 2020 reduced the share of expenditure on housing while increasing the share spent on food, suggesting that households spent more on food due to the associated uncertainty of the pandemic and lockdown” (World Bank Report).

Poverty Levels

The increase in GDP does not necessarily equate to a reduction in poverty. Poverty levels in The Gambia remain high, with many people living below the poverty line. This suggests that the benefits of economic growth are not being equitably distributed.

From the World Bank Report, “National poverty rate was estimated at 48.6 per cent in 2015 before declining to 45.8 per cent in 2019 thanks to a solid post-election recovery. These hard-won gains were reversed with the succession of shocks since 2020 compounded with persistent high inflation, which has eroded households purchasing power over the past years. Poverty is mainly a rural phenomenon, with 7 out of 10 people being poor in rural areas compared to 3 out of 10 people in urban areas. Underemployment is high at 41.5 per cent in 2022, while 63 per cent of employment is informal. Growth incidence analysis reveals large per capita consumption growth declines, affecting disproportionately poor households, especially those relying on the agriculture sector for substance. Limited and volatile growth has prevented the Gambia’s ability to sustainably address social and regional disparities in access to basic services such as connection to roads, distribution of cell towers, access to primary and secondary schools as well as health facilities, with rural areas being the most underserved”. Directly from the Report, this is a clear indication that GDP growth has little significance on the social being of the Gambians especially those living in the Rural areas (World Bank Report)

 Realistic Measures of Quality of Life

To better assess the quality of life and the standard of living in The Gambia, alternative indicators should be considered:

  1. Human Development Index (HDI): This composite index measures life expectancy, education, and per capita income. It provides a broader understanding of development beyond economic output.
  2. Gini Coefficient: This measures income inequality within a country. A high Gini coefficient indicates greater inequality, which can be detrimental to overall social cohesion and quality of life.
  3. Poverty Rate: Tracking the percentage of the population living below the poverty line provides a more direct measure of economic hardship and social well-being.
  4. Access to Basic Services: Indicators such as access to clean water, sanitation, healthcare, and education offer a clearer picture of the living conditions of the population.
  5. Employment Rates: Analyzing both unemployment and underemployment rates gives insight into the economic opportunities available to the population.

Conclusion

GDP is a limited measure of a country’s standard of living and quality of life, particularly in contexts like The Gambia where heavy investment in capital projects does not translate into widespread social benefits. To gain a true understanding of development and well-being, it is crucial to look beyond GDP and consider a range of social and economic indicators that reflect the lived experiences of all citizens. Addressing income inequality, improving access to healthcare and education, and reducing poverty are essential for enhancing the quality of life in The Gambia.

But the WB Report does acknowledge that Economic Growth has not been inclusive despite progress and raises issues of poverty and inequality; societal disparity in accessing essential services (which can be partly addressed through improved transport and communication infrastructure development, say better connectivity to the North and South Bank roads outside Banjul; more telecommunication towers in the hinterland; better school development in rural areas especially high schools.)

It also addressed the structural issues that are crippling labour development; revenue collection; the development of the private sector; governance etc.

Even though GDP growth does not provide a 100% accurate picture of the economic realities of the average Gambian, this article does not attack the report in any way or fact-check it or analyse its contents. This article only quotes and transliterates the World Bank report and demonizes some of its statistical data (perhaps without context) as being evidence of the authors apathy towards GDP as a metric for growth. Further criticisms have been raised as comments in the article

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