Sudan Economic & Strategic Outlook – GDP, Population & Labor Force
Sudan’s nominal GDP grew at a CAGR of 20% during the four year period from 2001-2005. In real terms, GDP grew at CAGR of 6.3% during the same period. On Y-o-Y basis preliminary figures point out that Real GDP grew at a better rate in the year 2005 (8%) compared to 2004 (5.2%). Nominal GDP stood at around US$27.7bn in 2005 and grew at 28.2% compared to GDP US$21.6bn and growth rate 22.2% in 2004. The acceleration in GDP growth in 2004 & 2005 as compared to previous years is attributed to the soaring oil prices worldwide. Per capita GDP has increased from US$374 in 2001 to US$790 in 2005. The Sudanese real GDP growth was sharp enough in 2005 to beat that of MENA economies. Sudan achieved a real GDP growth of 8.0%, while MENA economies achieved 5.4% during the year.
In year 2005, various sectors’ share in GDP has been similar to that in year 2004. Agriculture grew at 6.5% on Y-o-Y basis and lost its share slightly to 38.6% of GDP in 2005 (39.2% in 2004). Industry grew at 7.8% on Y-o-Y basis and had 27.8% share in GDP in 2005 (28.0% in 2004). Services grew at 11.0% on Y-o-Y basis and its share in GDP notched up slightly to 33.6% in 2005 as compared to that of 32.8% in 2004. Government share in services sector has improved a great deal in 2004 & 2005, growing at close to 30% in both years. On the back of impressive growth in each of major sectors, Sudan’s real GDP grew at 8.0% in 2005.
It is Agriculture sector that made about 38.6% of GDP, services made 33.6% and Industrial contributed 27.8% of the GDP in 2005, (as per central bank’s figures). Manufacturing which is sub-sector of Industrial made 6.7% of GDP in 2005 (7.1% in 2004). Export of goods has been increasing as a proportion of the GDP – 12.7% in 2001 to 17.4% in 2005.
Sudan’s population grew at a CAGR of 1.9% during the five year period from 2000 to 2005, while GDP per capita grew at a CAGR of 20.6% during the period of 2001-05. The population of Sudan is 36.2mn as per the latest estimates (2005). The population growth rate has been decreasing for last five years. As per United Nations Secretariat’s Department of Economic and Social affairs, population is expected to grow by 2.1% during the period 2005-10. Such a high rate of growth in population is typical of an undeveloped country and not regarded as a good sign for the country as already scarce resources are spread too thin among ever increasing population and creates burden on public and private services. Sudan's population consists of mainly young people; 44% of people are less than 15 years and only 2% of the people are over 65 year of age. Literacy rate in females aged 15 to 24 years was 69% for the period of 2000-04 and for the males in same category it was 82% for the period of 2000-04.
As Sudan has significant number of people in young age group, and economy has started growing well; we expect demand for housing to go up in the future. In addition to it, we can expect increased participation by the Sudanese in labor market, which is a good sign for Sudanese economy.
The external debt is one of the major problems that Sudan currently faces. Total external debt position of the Sudan as at Dec-05 amounted to US$27.7bn (100% of GDP), which was higher in $ value compared to year 2004 position of US$26.8bn. The increase was attributed to the burden of penalty interest rates and, contracting of new loans from some bilateral countries and multilateral institutions, an estimated 88.1% of it in arrears.
Sudan accumulated a sizable foreign debt in the 1970s and 1980s, mainly to finance a development program and because of rising interest rates and prices for imported oil. As per International Monetary Fund (IMF), between 1999 and 2002, total foreign debt averaged US$15.9bn. In 2003 the World Bank estimated the debt at US$17.1bn. The IMF, however, placed the figure at more than US$25bn.
The external debt has increased from US$20.9bn in 2001 to US$27.7bn in 2005, which means a CAGR of 7.3% p.a. However, external debt as percent of GDP has decreased consistently from 156.7% in 2001 to 100% in 2005. Similarly, debt service ratio on commitment basis improved from 39.6% in 2001 to 19.6% in 2005.
Total debt service paid decreased to US$279mn in 2005, a decrease of 8.2% on Y-o-Y basis, while total debt service paid as percentage of GDP also came down to 1.0% in 2005 from 1.4% in 2004. This signals serious but controlled debt condition. The inference is further supported by the fact that debt service ratio has been improving for the last few years (19.6% in 2005 vs. 39.6% in 2001). External debt position has been under control as evident from the improving ratios. External debt as ratio of exports of goods has improved to 5.7 times as compared to 12.1 times in 2002. External debt as ratio of government revenue too improved and stood at 4.6 times in 2005 (13.2 times in 2002), standard ratio for any country is supposed to be 2.5 times.
External debt as percentage of GDP has been declining on the back of rising GDP, which in turn is driven by the rising prices of crude oil worldwide. As oil prices have risen in last three years (US$54.2 per barrel in 2005 vs. US$25 per barrel in 2002) debt as percentage of GDP has come down significantly.
The general budget of the central government of Sudan has been tightened in last three years. The budget from a surplus of SDD123.8bn in 2002 has gone to a deficit of SDD121.0bn in 2005. The main reason has been sharp increase in the expenditure by the government from SDD346.9bn in 2002 to SDD1,593.9bn in 2005.
The increase in the expenditure has been closely matched by the increase in revenue from SDD470.7bn in 2002 to SDD1,472.9bn in 2005. Taxes, which made 45.3% of the revenue in 2002, accounted for about 32.1% of the government revenue in 2005. However, tax revenue has increased by 121.2% (CAGR 30.3%) during the same period. Indirect taxes has been the main driver of growth in tax revenue up by SDD207.7bn from 2002 to 2005. Among the non-tax revenue, oil revenue has increased sharply during 2002-05, up by 327.6% (CAGR 62.3%). This is the result of increasing oil prices worldwide during the period.
Most of the government expenditure goes to meet the current expenditure demands (86.75% in 2005). Out of the current expenditure major part goes to sub national government, the government in southern Sudan (31.1% of the current expenditure). Rest is made by capital expenditure i.e. capital expenditure makes just about 14% of the government expenditure. The government needs to spend more on capital expenditure to enhance long term growth in economy. Despite an increase of 56.3% in total government expenditure, the capital expenditure fell by 17.9% on Y-o-Y basis in 2005.
The government of Sudan was having fiscal surplus from 2002-04. It had fiscal deficit of SDD121.0bn in 2005 despite 33.4% increase in the government revenue. The reason was 81.3% increase in current expenditure in 2005, standing at SDD1382.7bn. The major contributor to increase in current expenditure was transfers to sub-national government, which increased by 411.5% or by SDD346.5bn in 2005. It made 31.1% of the current expenditure in 2005 as compared to 11.0% in 2004.
In 2005, the fiscal deficit was mainly financed by the banks - SDD76.6bn out of SDD121bn. Privatization contribution to financing the government budget has been falling since 2002. It was SDD0.3bn in 2005 (SDD11.1bn in 2002). A great deal of money went for domestic arrears repayment, which increased to SDD52.4bn in 2005, from SDD8.4bn in 2002.
Debt service paid by Sudan has been increasing for last three years. It increased from US$137mn in 2002 to US$279mn in 2005. Debt service as percentage of GDP has been around 1% during the period 2002-05 and it stood stationary at 1.0% in 2005. Fiscal balance as percentage of GDP dipped to a negative of 1.8% of GDP in 2005 from a positive of 3.1% in 2002.