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THE UNION OF THE COMOROSECONOMIC UPDATEJUNE 2025AN OCEAN OF OPPORTUNITIESBLUE ECONOMY AS A DRIVER OF SUSTAINABLE GROWTHPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized 2025 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 the 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:pubrightsworldbank.orgTHE UNION OF THE COMOROSECONOMIC UPDATEJUNE 2025AN OCEAN OF OPPORTUNITIESBLUE ECONOMY AS A DRIVER OF SUSTAINABLE GROWTHCOMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth4COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthAcknowledgmentsThe Comoros Economic Update is a World Bank report series that assesses economic trends,prospects,and policies in the Union of the Comoros.Each edition includes a section on recent economic developments and outlook,followed by a focus section analyzing issues of particular importance.The thematic section in this first and present edition seeks to advocate for the use of a blue economy model as a driver of sustainable and inclusive growth in the Union of the Comoros.The report is intended for a wide audience,including policymakers,business leaders,financial market participants,civil society,academia,and the community of analysts and professionals engaged in Comoros evolving economy.The report was prepared by a World Bank team led by Patrick McCartney(Senior Economist)and Jules Porte(Consultant).The team included Adia Amada,Almedina Music,Andry Herizaka Rakotoarisoa,Camilla Gandini,Cecilia Paradi-Guilford,Cedric Ndizeye,Eliane Razafimandimby Ramiandrison,Elsa Nabenge Shichilenge,Francis Muamba Mulangu,Hiska Noemi Reyes,Ian Forde,Jean Nicolas Arlet,Julia Rachel Ravelosoa,Lira Hariravaka Rajenarison,Lorenzo Bertolini,Mampionona Amboarasoa,Moctar Ben Karidjo,Neelam Nizar Verjee,Noro Aina Andriamihaja,Paul-Jean Feno,Pedro Martins,Rija Lalaina Andriantavison,Sachiko Kondo,Tim Kelly,Unnada Chewpreecha and Zubair Khurshid Bhatti.The team is grateful for valuable discussions with the Ministry of Finance,the Ministry of Economy,development partners,and representatives from the private sector.The team is thankful to the country office team for their support:Ahmed Mohamed Fatihiya,Gizework Zewdie Mekuria,Matoiri Boina Ramlat and Sitti Fatouma Ahmed.Lucy Victoria Davis designed the report.Front cover photos were purchased from iStock.All other photos throughout the report were taken and provided by Elena Tourio Lorenzo.The report was prepared under the overall guidance and supervision of Luc Lecuit(Acting Division Director for Comoros,Madagascar,Mauritius,Mozambique,and Seychelles),Hassan Zaman(Prosperity Regional Practice Director),Boubacar-Sid Barry(Resident Representative)and Marco Hernandez(Practice Manager for Economic Policy).For questions about this report please email Patrick McCartney at:pmccartneyworldbank.org or Diana Styvanley at dstyvanleyworldbank.org.For information about the World Bank and its activities in Comoros,please visit:https:/www.worldbank.org/en/country/comoros 5COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth6COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthTable of ContentsList of Figures,Tables and Boxes.8 Executive Summary.11 Chapter 1:The State of The Economy and Outlook.171.1 Economic growth and prices:Economic activity accelerated in 2024 fuelled by private consumption,the services sector and eased inflation.181.2 Labor Market and Poverty:High poverty rates highlight structural weaknesses hindering inclusive growth.201.3 Fiscal Policy:Weak revenue performance and rising expenditures contribute to widening fiscal deficit in 2024 amid debt vulnerabilities.211.4 External Sector:Slight deterioration of the current account deficit in 2024 attributed to reduced remittances and heightened debt servicing,despite a contracted trade deficit.241.5 Monetary policy:Public borrowing shift and banking vulnerabilities.271.6 Outlook and Risks:Anticipating modest growth acceleration by 2027 amidst significant downside challenges.281.7 Policy Options:Paving the way towards more efficient,sustainable,and inclusive growth 32Chapter 2:The Blue Economy as a Driver of Sustainable Growth In Comoros372.1 Sector Strategies for a Sustainable Blue Economy.382.1.1.Fisheries.382.1.2.Marine and Coastal Tourism.412.2 Enablers of Blue Economy Transformation.422.2.1.Governance and Institutions.422.2.2.Energy and Infrastructure.442.2.3.Digitalization and Innovation.442.2.4.Finance and Inclusion.442.2.5.Human Capital and Community Resilience.442.3 Macroeconomic Foundations for a Blue Economy Approach.452.4 Conclusion.462.4.1.Policy Options.467xxList of FiguresRA Figure 1:GDP growth volatility declines as political stability improves.14 RA Figure 2:Inflation eased in 2024 but remained elevated compared to historical levels.14 RA Figure 3:Public debt and debt service are rapidly increasing.14 RA Figure 4:Credit to the public sector crowded out credit to private sector in 2024.14 RA Figure 5:Fisheries is a key,yet underdeveloped,sector of the Comorian economy .14 RA Figure 6:Comoros has the third highest fisheries resources per capita in Africa .14 Figure 1.1:Economic growth has historically been highly volatile .17 Figure 1.2:Comoros GDP per capita has been low and relatively constant compared to most peer countries 17Figure 1.3:GDP growth is estimated to have surpassed pre-pandemic levels in 2024.18 Figure 1.4:A stable sectoral distribution of GDP has been maintained over the years.18 Figure 1.5:The blue economy represents an increasing share of GDP.19 Figure 1.6:GDP growth is mainly driven by private consumption.19Figure 1.7:Services remained the main contributor to GDP growth.20Figure 1.8:Despite high food inflation,CPI decreased in 2024.20Figure 1.9:Despite improving slightly,labor force participation remains weak.21Figure 1.10:2024 fiscal balance worsens due to increased expenditures.22Figure 1.11:Grants remained critical to overall revenues.22Figure 1.12:Expenditures rose in 2024 due to higher capital expenditures.22Figure 1.13:Public debt and debt service are rapidly increasing.22Figure 1.14:Public debt is mostly external and concessional.23Figure 1.15:IDA is the most important multilateral creditor.23Figure 1.16:Comoros has the lowest revenues excluding grants among peer countries.23Figures 1.17:Three products account for 75%of total exports,while energy and food imports make up nearly two-third of the total.24Figure 1.18:Comoros experiences a structural trade deficit due to its significantly higher imports compared to exports.24Figure 1.19:Despite an improved trade deficit,the CAD widened in 2024.25Figure 1.20:After a rise in recent years,remittances inflows stabilized in 2024.25Figure 1.21:Formal remittances received grew markedly in recent years.26Figure 1.22:Net remittances are highly seasonal.26Figure 1.23:Credit to the economy has shifted toward more public sector financing.27Figure 1.24:Growth in credit to the private sector was sluggish in 2024.27Figure 2.1:Comoros GDP per capita(constant 2015 US$)has remained broadly unchanged over the lastthree decades.37Figure 2.2:Comoros possesses one the highest fisheries wealth per capita in Africa.37Figure 2.3:Plan Comores mergent 2030 Strategic Pillars.38Figure 2.4:The Blue Economy has a substantial,yet undeveloped impact on the GDP.39Figure 2.5:Comoros lags behind peer countries in tourist arrivals and tourism expenditure is hence well below aspirational peers.41Figure 2.6:Except for the Covid-19 shock,the number of tourist arrivals gradually increased over the pastdecade.41Figure 2.7:Tourism infrastructure is well below thelevel of peer countries.41Figure 2.8:The blue economy transformation would impulse structural transformation.46Figure 2.9:With boosted GDP growth and more inclusive growth,poverty rate are expected to decline.46COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth8xxList of TablesTable 1:Key Macroeconomic Indicators,2020-2027.31 Table 2:Policy Options.34 Table 3:Policy Options.48 List of BoxesBox 1:Fisheries and Tourism Blue Economy Driven Growth.19 Box 2:Utilizing Remittances as a Development Lever.26Box 3:Maritime Spatial Planning.40 Box 4:Lessons from Bangladesh and Other Small Island Developing States:Blue Economy Strategies.43COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth9COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth10COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthExecutive SummaryChapter 1:The State of the Economy and OutlookComoros has a rare opportunity to break from its historical cycle of low growth by leveraging recent stability to implement transformative policies that promote inclusive development and resilience.Despite achieving greater stability since reunification,the economy has not broken from its historical pattern of stagnation.Growth has remained persistently weak,keeping per capita income virtually unchanged over time.This prolonged underperformance has left poverty levels stubbornly high,with minimal improvement compared to peer nations.The countrys limited progress has been further exposed by recent global shocks,underscoring the urgent need for transformative policies to spur inclusive growth and build resilience.However,the enhanced stability that the country has recently achieved,coupled with the opportunity to host the 2027 Indian Ocean Island Games,represents a pivotal turning point for driving reform momentum.Recent growth momentum offers a foundation for structural reforms that can strengthen investment,boost exports,and shift the economy toward more balanced and sustainable drivers of growth.Real GDP growth rose to 3.4 percent in 2024,supported by household consumption,underpinned by a 5.4 percent rise in remittances in nominal terms,and strong services sector performance.However,the economys overreliance on consumption and services and still relatively elevated inflation combined with declining exports and weak private investment(due in part to electoral uncertainty),signals vulnerability.Structural constraints on investment and external competitiveness are limiting productivity gains and employment creation.Without addressing these,growth will remain fragile,making it harder for Comoros to generate the jobs and incomes needed to reduce poverty and build resilience against shocks.Conversely,strengthening export capacity and investment would unlock more sustainable,broad-based growth.Addressing persistent poverty and limited economic opportunities through inclusive employment,education reforms,and an improved business environment presents a path to unlock human potential and enhance social cohesion.Around 45 percent of the population lived below the poverty line in 2020,with severe regional disparities,especially in Ndzuwani,and limited prospects for upward mobility.Low labor force participation(particularly among women),underemployment,and low education levels continue to restrict productivity and earnings.Remittances,while providing temporary relief(averaging 17 percent of GDP),cannot substitute for a dynamic domestic economy.If these structural barriers persist,poverty will remain entrenched,and inequality could worsen,undermining social cohesion.Creating more inclusive and productive employment opportunities through structural reform is vital to improving living standards and reducing economic vulnerability.Targeted fiscal reforms can transform current pressures into an opportunity to create a more sustainable and equitable public finance system that supports long-term development priorities.The fiscal deficit widened to 3.9 percent of GDP in 2024,reflecting flat domestic revenues and increased capital spending,particularly on infrastructure.While investment in infrastructure is critical for development,rising public debt(36.8 percent of GDP)and greater reliance on non-concessional borrowing elevate fiscal risks.Continued dependence on trade taxes,especially as WTO accession reduces tariffs,underscores vulnerabilities in the tax structure.Without comprehensive revenue and expenditure reforms,fiscal space for critical social and development spending will shrink,increasing the risk of debt distress.Rebalancing fiscal policy is essential to maintaining macroeconomic stability and building public trust.While external vulnerabilities persist,WTO accession and strategic export diversification offer Comoros a chance to build a more competitive and resilient economy in the context of the African Continental Free Trade Area(AfCFTA).Despite a slight improvement in the trade deficit,the current account deficit widened to 3.2 percent of GDP in 2024 due to higher debt servicing costs and a dip in remittance inflows.Comoros remains heavily dependent on food and energy imports,making it highly sensitive to external price fluctuations.While WTO accession creates long-term opportunities for export 11COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growthdiversification,the immediate loss of tariff revenues adds near-term pressure.Without a shift toward more diversified,value-added exports(such as fish products processing industry or tourism services)and stable financing sources,the economy will remain exposed to external shocks.Addressing structural trade imbalances is key to ensuring long-term external sustainability.Strengthening the financial sector and expanding access to credit can catalyze private sector growth,drive innovation,and reduce reliance on remittances and public spending.While overall credit to the economy held steady at 24.4 percent of GDP in 2024,a sharp increase in public borrowing(up 22.9 percent)crowded out the private sector,where credit growth slowed to just 1.6 percent.Limited access to credit hinders the ability of households and firms to invest in productive activities,start businesses,or expand operations,restricting job creation and income growth.At the same time,persistently high levels of non-performing loans(14.4 percent)reduce banks willingness and capacity to lend,especially to riskier or underserved borrowers.These bad loans tie up capital and signal weaknesses in risk assessment and loan recovery systems,undermining confidence in the banking sector.If financial intermediation does not improve,the private sector will remain underdeveloped,and economic growth will continue to rely heavily on remittances and public spending.Strengthening financial supervision,improving credit risk management,and expanding access to affordable finance are critical to building a more inclusive,dynamic,and resilient economy.With decisive reforms,Comoros can transition to a more diversified and investment-led growth model,laying the groundwork for sustained improvements in productivity,resilience,and living standards.Growth is projected to reach 4 percent by 2027,driven by consumption and planned investments,but long-standing weaknesses in trade and inflation management remain.Poverty is expected to decline only slightly by 2025,reflecting limited progress in job creation and productivity.Meanwhile,the current account deficit is expected to widen to 5 percent of GDP,signaling rising external financing needs.Without reforms to enhance competitiveness,attract investment,and create jobs,Comoros risks falling into a low-growth,high-dependency equilibrium.A shift toward a more diversified,inclusive,and investment-driven economy,focusing on sectors such as the blue economy,tourism,and agriculture,is essential for sustained development.The country faces significant downside risks that could derail progress and deepen vulnerabilities.Comoros remains highly exposed to climate-related disasters,which have previously caused damage worth up to 10 percent of GDP.Rising fiscal pressures,contingent liabilities from state-owned enterprises,and a fragile banking sector compound macroeconomic risks.If left unaddressed,these challenges could trigger fiscal instability,limit growth,and undermine poverty reduction gains.Building resilience through improved public financial management,targeted investments,and private sector reforms will be critical to safeguarding economic progress and protecting the most vulnerable.Addressing Comoros macroeconomic and poverty challenges requires focused engagement in four key areas:fiscal sustainability,private sector development,financial inclusion,and governance reforms.First,strengthening fiscal sustainability and debt management is critical to ensuring macroeconomic stability,preventing debt distress,and creating fiscal space for essential social and infrastructure spending.Second,boosting private sector development and export competitiveness can drive job creation,reduce reliance on volatile sectors,and enhance resilience to external shocks.Third,enhancing financial sector stability and inclusion will expand access to credit and financial services,particularly for underserved populations and small businesses,fostering broader economic participation.Finally,improving governance and public sector efficiency is vital to curbing corruption,improving public service delivery,and ensuring that resources are effectively allocated to poverty reduction efforts.Together,these reforms can help Comoros achieve more sustainable and inclusive growth.12COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthChapter 2:The Blue Economy as a Driver of Sustainable GrowthThe blue economy is a sustainable ocean-based economic model that promotes growth,jobs,and ecosystem health while ensuring long-term resource resilience.The blue economy refers to the sustainable use of ocean and coastal resources to support economic growth,improve livelihoods,and protect marine ecosystems.It includes industries like fisheries,aquaculture,renewable energy,tourism,and maritime transport while minimizing environmental harm.By balancing economic development with conservation,the blue economy aims to ensure long-term ocean health and resource availability for future generations.The blue economy presents a data-backed,transformative pathway for Comoros to achieve sustainable,inclusive growth and structural transformation.Comoros underutilized natural capital,anchored in fisheries and marine tourism,offers a credible path to sustainable development aligned with the goals of Plan Comores Emergent 2030(PCE 2030).Despite its vast Exclusive Economic Zone(EEZ)and marine biodiversity,economic volatility,rapid demographic growth,and environmental degradation have constrained progress.A bespoke macroeconomic model underscores the opportunity:with targeted reforms and investments,the blue economy could lift Comoros to upper-middle-income status by 2050,requiring sustained 6.1 percent GDP growth annually,mirroring Cabo Verdes trajectory.Realizing this ambition depends on restoring natural capital,expanding renewable energy,modernizing infrastructure,and enhancing environmental safeguards.Fisheries modernization can raise the sectors share to 16 percent of GDP by 2035 and unlock inclusive growth through value addition,resilience,and sustainability.The fisheries sector,averaging 11.4 percent of GDP from 20182024,remains constrained by artisanal methods,poor infrastructure,and weak access to markets.Strategic investments and governance reforms could enable the sector to grow at 5.2 percent annually over 20252050,peaking at 7.7 percent growth through 2035 and raising its share of GDP to 16 percent by that year.This expansion will be driven by improved cold chain logistics,port and fleet upgrades,sustainable aquaculture,and better management of fishing rights within the EEZ.Measures to address Illegal,Unreported,and Unregulated(IUU)fishing,expand financial inclusion,particularly for women and Micro,Small,and Medium Enterprises(MSMEs),and enhance health and safety systems are vital to building a resilient fisheries workforce.Marine tourism could quadruple arrivals by 2030,becoming a major growth engine and representing over 6 percent of GDP by mid-century.Marine and coastal tourism,which currently represents 1.7 percent of GDP,is poised for rapid growth if infrastructure gaps and environmental vulnerabilities are addressed.The 2027 Indian Ocean Games offer a catalytic opportunity,with tourist arrivals projected to quadruple,from 45,100 in 2019 to 200,000 by 2030,if current trends and investments in hotels,transport,and facilities are sustained.By 2050,Comoros aims to match Cabo Verdes 2022 benchmark of 785,000 annual arrivals.Over 20252050,tourisms economic contribution is expected to grow at 10.9 percent annually,reaching 6.5 percent of GDP.Eco-tourism,integrated with fisheries and conservation,can further drive inclusive development while preserving natural ecosystems.Achieving the blue economy vision hinges on cross-sectoral enablers including infrastructure upgrades,governance reform,and digital and financial innovation.Critical reforms,ranging from modernizing SONELEC and Comores Telecom and expanding renewable energy to enforcing IUU fishing regulations,are foundational for unlocking productivity across sectors.Total productivity factor is projected to contribute 1.5 percentage points to annual GDP growth.Port infrastructure like Moheli,road network improvements,and digital tools for resource management and eco-tourism services will be essential.Financial innovation,especially through blended finance and diaspora investment,can help mobilize the 23 percent of GDP in annual investment needed.Strengthened human capital through vocational training,education,and healthcare will support a more capable and climate-resilient workforce.Comoros economic structure will shift toward logistics and services and diversification,positioning the country as a regional sustainability leader by 2050.The blue economy transformation will drive a significant structural shift,with services projected to grow to 64 percent of GDP and industry to 15.6 percent by 2040.Agricultures share of GDP will fall from 13.4 to 4.8 percent,while fisheries will peak at 16.1 percent in 2035 before stabilizing at 10.8 percent.Tourism will more than triple its share of GDP,underscoring the shift toward a diversified,service-driven economy.Integrated development of tourism,fisheries,and conservation,underpinned by sound governance and long-term investment,can deliver inclusive growth,environmental resilience,and regional leadership in sustainable development,enabling Comoros to meet its 2050 ambitions.13COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthAt-a-GlanceES Figure 1:GDP growth volatility declines as political stability improves ES Figure 2:Inflation eased in 2024 but remained elevated compared to historical levels -8-6-4-20246810121982198419861988199019921994199619982000200220042006200820102012201420162018202020222024GDP growth(annual%)First separatist crisis MohliPeace agreement and reunificationCFAF devaluationLegislative election1st post-peace agreementseparatist crisis AnjouanFirst democraticallyelected president,Sid Mohamed DjoharPeaceagreementSeparatist crisisAnjouan and MohhliFall of theAhmedAbdallahregimeCholeraandelectionsCycloneKenneth&COVID-1902468101214Annual inflation(in percent)Inflation(%,period average)Average 2011-20192012 2014 2016 2018 2020 2022 2024eSource:INSEED,World Bank staff estimatesSource:INSEED,World Bank staff estimatesES Figure 3:Public debt and debt service are rapidly increasing ES Figure 4:Credit to the public sector crowded out credit to private sector in 2024 0.00.51.01.52.02.505101520253035402017201820192020202120222023 2024ePublic debt stock(percent of GDP)External DebtDomestic DebtDebt Service-RHS-10-505101520253020172018201920202021202220232024Public sectorPrivate sectorDomestic credit growthContributions to domestic credit growth,in percentage points,2017-2024Source:Government of Comoros,World Bank staff estimatesSource:Central Bank of Comoros,World Bank staff estimatesES Figure 5:Fisheries is a key,yet underdeveloped,sector of the Comorian economy ES Figure 6:Comoros has the third highest fisheries resources per capita in Africa 051015202530352010-20142015-20192020-2024Fisheries(as a share of GDP)Fisheries(as a share of primary sector GDP)Fisheries(annual growth)050100150200250300350400450Fisheries,per capita,chained 2019 USDSource:INSEED,World Bank staff estimatesSource:UNWTO,World Bank staff estimates14COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth15COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth16Chapter 1:The State of The Economy and OutlookThe Union of Comoros,an archipelago off East Africa,balances fragile stability with economic potential.Famous for its vanilla and cloves,the archipelago grapples with several constraints,such as remoteness,small size,vulnerability to climate shocks,and heavy reliance on imports,remittances,and foreign aid.Growth has been persistently subdued.Since independence,Comoros has averaged just 2.6 percent annual GDP growth(19802023),with per capita income hovering at about$1,530.Its 3.0 percent growth(20002023)underperforms peers Sao Tome and Principe(3.6 percent),Cabo Verde(4.5 percent),and Mauritius(3.6 percent),while rapid population growth has left per capita gains among the regions weakest(Figure 1.1 and 1.2).Figure 1.1:Economic growth has historically been highly volatile -8-6-4-20246810121982198419861988199019921994199619982000200220042006200820102012201420162018202020222024GDP growth(annual%)First separatist crisis MohliPeace agreement and reunificationCFAF devaluationLegislative election1st post-peace agreementseparatist crisis AnjouanFirst democraticallyelected president,Sid Mohamed DjoharPeaceagreementSeparatist crisisAnjouan and MohhliFall of theAhmedAbdallahregimeCholeraandelectionsCycloneKenneth&COVID-19Source:INSEED,World Bank staff estimatesFigure 1.2:Comoros GDP per capita has been low and relatively constant compared to most peer countries 05001.0001.5002.0002.500Structural PeersSao Tome and PrincipeTimor-LesteSolomon IslandsComoros199920012003200520072009201120132015201720192021202301.0002.0003.0004.0005.0006.000Aspirational PeersTongaSamoaFijiCabo VerdeComoros199920012003200520072009201120132015201720192021202302.0004.0006.0008.00010.00012.00014.00016.00018.00020.000Aspirational Regional PeersMauritiusSeychellesComoros1999200120032005200720092011201320152017201920212023Sources:World Bank national accounts data,and OECD National Accounts data files,World Bank staff estimatesCOMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth17COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthComoros small and informal private sector is consumption-driven.The latter is strongly influenced by the tradition of“Grands Mariages”which,although stimulate private consumption,do not contribute significantly to investment and sustainable development.From 2010 to 2023,the services sector(other private services)1 dominated GDP growth,though its role diminished post-2020 due to COVID-19.The primary sector,notably fisheries,gained prominence,while the secondary sector stagnated.Migration shapes the economy.A third of Comorians live abroad,mostly in France,and remittances(17 percent of GDP average between 2013 and 2023)alleviate poverty but fail to spur structural change.Poverty rose from 35.2 percent(2018)to 38.3 percent(2022),hitting rural areas and youth hardest.External aid($1.6 billion,19902023)funds 90 percent of public investment,yet dependency persists without transformative growth.Climate shocks compound fragility.Cyclone Kenneth(2019)created damages amounting to 10 percent of GDP,and rising risks threaten over half the population.Youth employment is very low,with half of young workers lacking jobs and just 3 percent in formal employment.Education lags(55 percent secondary enrolment,Human Capital Index:0.40),undermining future prospects.Governance challenges,chronic fiscal deficits,high risk of debt distress,and weak tax collection constrain social spendings impact,leaving resilience efforts stymied.1.1 Economic growth and prices:Economic activity accelerated in 2024 fuelled by private consumption,the services sector and eased inflationEconomic growth increased from 3.0 to 3.4 percent in 2024,mainly fuelled by private consumption and the services sector.On the supply side,economic activity was driven by the services sector,as tourism-related sectors grew by 4.5 percent.GDP growth was broad-based,with agriculture,industry,and services all expanding by more than 3 percent in 2024.The agriculture sector rebounded from recent weather-driven fluctuations,recording growth of 3.5 percent in crops and 3.2 percent in fisheries,the latter representing a promising engine for future economic development(see Box 1 and Figure 1.5).Overall,agriculture contributed 0.9 percentage points to GDP growth.Industry emerged as the fastest-growing sector at 3.8 percent,though its modest share of GDP limited its contribution to 0.5 percentage points.This performance was propelled by mining(4.6 percent)and construction(8 percent),the atter benefiting from large-scale projects like the Galawa Hotel and El-Maarouf Hospital.Services remained the largest contributor to GDP growth,adding 1.9 percentage points,as commerce,private services,and public administration all posted robust gains(Figure 1.7).Tourism-related activities(hospitality)grew at 4.5 percent,but improved performance is hindered by persistent infrastructure gaps and market challenges.Figure 1.3:GDP growth is estimated to have surpassed pre-pandemic levels in 2024 Figure 1.4:A stable sectoral distribution of GDP has been maintained over the years -1.00.01.02.03.04.05.020112012201320142015201620172018201920202021202220232024eReal GDP Growth(%)Average GDP Growth 2011-201928.625.726.826.026.013.212.211.111.912.051.856.555.455.155.06.45.66.77.07.0010203040506070809010020102015202020232024eAgricultureIndustryServicesNet Taxes on ProductionSource:INSEED and World Bank staff estimatesSource:INSEED and World Bank staff estimates_1 These include notably real estate and household services.18COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthBox 1:Fisheries and Tourism Blue Economy Driven Growth Fisheries have shown strong growth,averaging 12.7 percent annually(20152021,and now represent 31 percent of agricultural output,contributing 0.3 percentage points to GDP growth in 2024.2 Despite this progress,the sector remains underdeveloped and dominated by small-scale low-productivity operations with minimal exports.Challenges include outdated equipment,weak cold chains,and climate vulnerabilities,such as ocean warming.However,untapped potential exists.Comoros rich fishing grounds and domestic demand provide a foundation for growth.Key opportunities include:Modernizing fleets and adopting sustainable practices.Expanding processing to cut imports and employ women in shore-based roles.Reforming exclusive economic zone(EEZ)licensing terms to attract investment.Such reforms could reduce reliance on volatile commodity exports,such as vanilla and cloves,while boosting production and employment.Tourism,though promising,remains underutilized.Despite pristine beaches and unique biodiversity,the sector represented just 1.7 percent of GDP in 2024,hampered by poor infrastructure,weak marketing,and competition from neighboring countries.Strategic upgrades,better air connectivity,high-end accommodations,and ecotourism branding could unlock its potential,attracting higher-value visitors to Comoros volcanoes,reefs,and cultural sites.On the demand side,GDP growth was mainly driven by private consumption.Private consumption,mainly via the grands mariages,drove GDP growth in 2024,contributing 2.8 percentage points,buoyed by a 5.4 percent real-term rise in remittances inflows and easing inflation(Figure 1.8).However,total investments dragged growth down by 1.6 percentage points,as private investment slumped amid election uncertainty and a high base effect from 2023s strong performance.Public investments share of GDP rose by 3.6 percentage points of GDP,supported by infrastructure projects like the Galawa Hotel and El-Maarouf Hospital,but failed to fully offset the private sector decline.3 Export performance weakened,with merchandise exports falling 5.6 percent due to lower vanilla prices and a poor clove harvest,despite strong ylang-ylang sales.With imports holding steady,the widening trade deficit further weighed on GDP growth.Figure 1.5:The blue economy represents an increasing share of GDP Figure 1.6:GDP growth is mainly driven by private consumption 0246810121416Tourism(hotel and restauration)FisheriesBlue Economy201020112012201320142015201620172018201920202021202220232024-15-10-505101520172018201920202021202220232024eDemand side contribution to growth(percent)Private ConsumptionGovernment ConsumptionGross Fixed InvestmentStatistical DiscrepancyChange in InventoriesNet ExportsGDP GrowthSource:INSEED and World Bank staff estimatesSource:INSEED and World Bank staff estimates_2Figure 1.5 shows a decline in fisheries contribution to GDP.This decline can be attributed to three main factors.First,while the sectors production value remained stable from 2021 to 2023,maintaining higher levels than previous years with about 3 percent annual growth,its GDP share decreased as other sectors expanded faster.Second,the Banque Centrale des Comores(BCC)highlights how rising energy prices in 2021-2022 and their persistence through 2023 negatively impacted fisheries.Third,the sector faced operational challenges after the Socit Nationale de Pche ceased activities in 2018,with planned reactivation only coming in 2024.3The government has to fill an infrastructure gap brought on by low private investment.However,a large capital share can crowd out operations,maintenance,or social spending needed to translate infrastructure into service delivery.In light of this,the Government may consider conducting a Public Investment Management Assessment(PIMA),a diagnostic tool developed by the IMF to evaluate the effectiveness of a countrys public investment management practices.The PIMA framework is designed to help governments assess the strengths and weaknesses of their public investment systems and identify areas for improvement.It focuses on various stages of the public investment cycle,including planning,allocation,and implementation.19COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthFigure 1.7:Services remained the main contributor to GDP growth Figure 1.8:Despite high food inflation,CPI decreased in 2024 -3-2-101234520172018201920202021202220232024eSupply side contribution to growth(percent)AgricultureIndustryServicesNet Taxes on ProductionGDP Growth-10-50510152025Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Oct-21Jan-22Apr-22Jul-22Oct-22Jan-23Apr-23Jul-23Oct-23Jan-24Apr-24Jul-24Oct-24OthersHealthCommunicationTransportHousing,water,electricity,gas and other fuelsFood and non-alcoholic beveragesInflationContribution to monthly inflation(y/y)by main componentsSource:INSEED and World Bank staff estimatesSource:INSEED and World Bank staff estimatesDespite stubborn food inflation,inflation moderated in 2024.4Average annual inflation declined from 8.5 to 5.0 percent in 2024,as global commodity prices stabilized and inflation in the Eurozone eased.Headline inflation moderated slightly,driven by lower energy prices(-1.4 percent;10.7 percent of CPI basket)and stable transport costs(0.4 percent).However,food inflation remained elevated at 7.2 percent(56.1 percent of CPI basket),adding 4 percentage points to 2024 headline inflation(Figure 1.8).Supply shocks,such as heavy rains and flooding(April-May 2024),cholera-related shipping delays,and seasonal demand surges during Grands Mariages,highlight structural vulnerabilities in domestic food markets.5 1.2 Labor Market and Poverty:High poverty rates highlight structural weaknesses hindering inclusive growthHigh poverty rates reflect entrenched structural weaknesses,including low labor force participation,regional inequalities,remittance dependence,and limited private sector dynamism,which undermine broad-based and inclusive growth.Persistently high poverty rates reflect slow economic growth,regional disparities,and structural vulnerabilities such as reliance on remittances and aid.In 2020,45 percent of Comorians lived below the national poverty line(KMF 41,495/USD 99 monthly),with acute disparities across regions.Ndzuwani has the highest poverty rates,followed by Ngazidja(excluding Moroni),and rural areas also bear the heaviest burden.While methodological differences complicate comparison with 2014 data,imputation analysis indicates persistently high poverty levels.This stagnation aligns with sluggish pre-pandemic growth(average 1 percent annual GDP per capita growth during 2016-19)-far too low to reduce poverty meaningfully.Structural vulnerabilities,including overreliance on remittances and foreign aid,and tourism shocks,coupled with political instability,have undermined development progress._4In 2024,inflation,which indicate the evolution of prices according to the Consumer Price Index(CPI),remained positive,signifying an increase in prices.However,the rate of this increase was lower than that observed in the previous year,indicating a slowdown in the pace of inflation.5The Grand Mariage in Comoros grants individuals the status of Notable(homme accompli).This elaborate ceremony,involving expensive gifts and feasts,enhances social standing.Originally for eldest children,it now includes all willing participants,increasing costs and monetizing what was traditionally a social exchange.The ritual strengthens mutual obligations and remains significant in Grande Comore and Moheli but is declining in Anjouan.20COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthPoverty is strongly associated with underemployment,6 low education levels,large household sizes,and rising food insecurity despite moderate overall inequality.Poverty in Comoros shows strong correlations with underemployment,low educational attainment among household heads,and large family sizes.Agricultural workers,informal sector employees,and low-wage laborers,particularly in large households,face disproportionately high poverty rates.While income inequality measures appear moderate by regional standards,significant disparities emerge across deciles:the urban wealthiest 10 percent account for 26.2 percent of consumption expenditures,the poorest 40 percents 19.8 percent share.These economic vulnerabilities are compounded by widespread food insecurity,with 31.1 percent of children under 5 being stunted,surpassing the African average(30.7 percent).In the formal sector,the largest employer is the State through public administration and state-owned enterprises.Weak labor force participation,7 especially among women,constrains income generation and private sector growth,limiting Comoros poverty reduction potential.Comoros faces a critical labor market challenge:weak participation(52.6 percent in 2024)limits income opportunities and perpetuates poverty(Figure 1.9).While improved by 8.2 percentage points since 2014,rates remain below Sub-Saharan Africa(70 percent)and LMIC averages(61 percent).Disparities persist across islands:Ngazidja shows steady growth,Mwali leads in post-2014 gains,and Ndzuwani has only recovered to 2004 levels.A key constraint is low female labor force participation(41.6 percent in 2020 vs.64.1 percent for men),reflecting socio-cultural norms akin to North Africa.Despite progress among young women in Mwali,this gender gap stifles private sector growth,particularly in high-potential industries like tourism.Figure 1.9:Despite improving slightly,labor force participation remains weak 010203040506070200420142020200420142020200420142020MaleFemaleAllLabor force participation by region,2004-2020,in percent of the working-age populationNgazidjaNdzouaniMwaliComorosSource:2004,2014,and 2020 Harmonized Survey on Household Living Conditions,INSEED,World Bank staff estimates1.3 Fiscal Policy:Weak revenue performance and rising expenditures contribute to widening fiscal deficit in 2024 amid debt vulnerabilitiesThe fiscal position weakened in 2024 with flat revenues alongside rising externally financed investment,and mounting debt vulnerabilities,underscoring the urgency of strengthening domestic revenue mobilization,expenditure control,and structural reform implementation.Revenue performance remained fragile in 2024,with disruptions from elections,socio-political unrest,and health shocks weighing on tax collection.Despite a nominal 4 percent increase in revenue collection compared to 2023,total government revenues remained broadly stable as a share of GDP at 16.6 percent in 2024.Post-election disruptions,socio-political unrest,and a cholera outbreak have significantly disrupted tax collection efforts.Additionally,weaker compliance and operational challenges faced by State-Owned Enterprises(SOEs)may have further compounded these difficulties driving significant declines in key categories:consumption tax revenues fell by 0.3 percent of GDP;corporate income tax fell by 0.1 percent of GDP;and revenues from SOEs fell by 0.4 percent of GDP.8 However,_6The term“underemployment”here is defined as the underutilization of labor in terms of productivity.Therefore,any individual earning less than the current minimum hourly wage is considered to be in a situation of underemployment.7 Labor force participation,as defined by the International Labour Organization(ILO),refers to the proportion of the working-age population that is actively engaged in the labor market,either by being employed or actively seeking employment21COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growthimproved customs revenues(rising by 0.3 percent of GDP)offset part of the decline.This highlights Comoros high dependence on external trade taxes,which is an area facing future pressure from World Trade Organization(WTO)accession.Other taxes increased by 0.3 percent of GDP.Grants also increased slightly from 6.3 to 6.5 percent of GDP,contributing to the marginal rise in total revenues(Figure 1.11).Government expenditure rose sharply in 2024,as higher externally financed investments outweighed reductions in current spending,leading to a widening fiscal deficit.Current expenditures declined from 12.7 to 11.8 percent of GDP,reflecting reduced subsidies and transfers introduced in earlier years to cushion shocks,and the phasing out of cash transfers under the World Bank-supported social safety net project(Figure 1.12).Authorities also scaled back one-off expenditures,such as domestic funding for the African Union presidency and election-related costs,though spending linked to parliamentary elections remained.Domestically financed investments underperformed due to delays in major projects,such as the El Maarouf hospital.Nevertheless,externally financed capital expenditure surged,raising total capital spending from 5.1 to 8.7 percent of GDP.As a result,total expenditure increased from 17.8 to 20.5 percent of GDP in 2024,widening the fiscal deficit significantly from 1.3 to 3.9 percent of GDP,mostly financed through external sources(Figure 1.12).The primary balance remained negative,reaching 3.5 percent of GDP in 2024,after 0.9 percent in 2023.Figure 1.10:2024 fiscal balance worsens due to increased expenditures Figure 1.11:Grants remained critical to overall revenues -5-4-3-2-101051015202520172018201920202021202220232024eFiscal balance(percent of GDP)Total Revenues and GrantsTotal ExpendituresGeneral Government Balance(RHS)0.02.04.06.08.010.012.014.016.018.020.020172018201920202021202220232024eTotal revenues and grants:compositionOtherGrantsTaxes on InternationalTrade and TransactionsTaxes on Goods and ServicesPersonal and Corporate Income TaxTotal Revenues and GrantsSource:Government of Comoros,World Bank staff estimatesSource:Government of Comoros,World Bank staff estimatesFigure 1.12:Expenditures rose in 2024 due to higher capital expenditures Figure 1.13:Public debt and debt service are rapidly increasing 051015202520172018201920202021202220232024eTotal expenditure:compositionWages and CompensationUse of Goods and ServicesInterest PaymentsCurrent TransfersCapital ExpendituresOther ExpendituresTotal Expenditures0.00.51.01.52.02.505101520253035402017201820192020202120222023 2024ePublic debt stock(percent of GDP)External DebtDomestic DebtDebt Service-RHSSource:Government of Comoros,World Bank staff estimatesSource:Government of Comoros,World Bank staff estimates22_8Based on data transmitted by the Comorian authorities as of end-April 2025.COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthPublic debt has risen steadily in the past decade,with growing non-concessional borrowing and liquidity pressures elevating debt vulnerabilities.Since completing the Heavily Indebted Poor Countries(HIPC)initiative in 2013,public debt has risen from 10.3 percent to an estimated 36.8 percent of GDP by end-2024(Figure 1.13).External debt,largely concessional,amounts to 29.9 percent of GDP,but non-concessional borrowing is rising,notably due to the Galawa hotel project(Figure 1.14).Concurrently,debt servicing experienced a rapid increase.Initially,it constituted less than 10 percent of revenues(excluding grants)until 2020.However,by 2024,it had escalated significantly,reaching approximately one-quarter of government revenues.The latest joint IMFWorld Bank Debt Sustainability Analysis(December 2024)assessed Comoros as being at high risk of external and overall debt distress.Tight liquidity conditions contributed to the accumulation of new external arrears,despite government efforts to clear outstanding obligations,further highlighting fiscal and financial vulnerabilities.Figure 1.14:Public debt is mostly external and concessional Figure 1.15:IDA is the most important multilateral creditor 41.021.219.35.812.3Public debt stock composition at end-2024Multilateral Creditors-ExternalBilateral Creditors-ExternalGuarantees-ExternalCommercial Banks and otherFinancial Institutions-DomesticTreasury-Domestic0.05.010.015.020.0IDABADEAIMFFAD(IMF)IsDBTDBIFADOPECSFDExim Bank IndiaKFAEDBPI FranceMultilateral CreditorsBilateral CreditorsExternal Debt Composition at end-2024,in percent of totalSource:Comoros Debt Bulletin 2024,World Bank staff estimatesSource:Comoros Debt Bulletin 2024,World Bank staff estimatesFiscal performance highlights persistent structural weaknesses,including heavy reliance on trade taxes,vulnerability to shocks,and rising public investment pressures.Despite initial projections of improved fiscal discipline,tax collection targets were missed due to lower-than-expected GDP growth,post-election unrest in early 2025,adverse weather,and a cholera outbreak.Customs receipts continue to dominate revenues but are expected to decline following WTO accession,underscoring the urgent need to diversify domestic revenue sources.Comoros has indeed the lowest revenue(excluding grants)to GDP ratio among peers(Figure 1.16).On the expenditure side,public investment remains critical for addressing substantial development needs,even amid tight financing conditions.Meanwhile,liquidity challenges led to the build-up of new external arrears,reflecting ongoing structural fiscal and financing constraints.Figure 1.16:Comoros has the lowest revenues excluding grants among peer countries 051015202530354045ComorosSao Tomeand PrincipeTimor-LesteSolomonIslandsSamoaFijiCabo VerdeMauritiusSeychellesTotal revenues(excl.grants)Source:World Bank staff estimates23COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthThe government is prioritizing revenue mobilization,expenditure efficiency,wage bill management and SOEs reforms to strengthen fiscal sustainability.Key initiatives include expanding taxpayer registration,improving compliance through digital platforms such as SIGIT-SYDONIA,rationalizing public wage spending,and enhancing governance in SOEs to reduce fiscal risks.Clearing domestic arrears and ensuring greater expenditure discipline are also central to the authorities fiscal strategy.However,sustained progress will depend on effective implementation of structural reforms and careful management of fiscal consolidation efforts.1.4 External Sector:Slight deterioration of the current account deficit in 2024 attributed to reduced remittances and heightened debt servicing,despite a contracted trade deficitExternal balances deteriorated slightly in 2024 as a modest narrowing of the trade deficit was offset by lower remittances and increased external debt servicing,while a narrow export base and high import dependence continue to weigh on resilience and growth prospects.In Comoros,the external sector dynamics are significantly influenced by several key factors,including remittances,debt-financed projects,a narrow export base,and high import dependency.Remittances serve as a crucial income source for many households,playing a vital role in sustaining private consumption and mitigating trade deficits.Over the past decade,net remittances,calculated as inflows minus outflows,have averaged 11.3 percent of GDP and continue to grow,underscoring their importance to the economy.Due to fiscal constraints,Comoros increasingly relies on external debt-financed projects to fund essential structural initiatives in infrastructure,health,and education,intensifying its external financing needs.Historically,Comoros has faced a structural trade deficit-when a countrys imports of goods and services exceed its exports-driven by its weak competitive advantage and heavy reliance on imports for food and energy consumption(Figure 1.17).The countrys narrow export base,dominated by vanilla,cloves,and ylang-ylang,underscores the urgent need for diversification to bolster resilience against external shocks(Figure 1.18).While the services sector,particularly tourism,contributes to exports,its potential remains largely untapped.Figures 1.17:Three products account for 75%of total exports,while energy and food imports make up nearly two-third of the total Figure 1.18:Comoros experiences a structural trade deficit due to its significantly higher imports compared to exports 2.461.410.325.9Exports,as a share of total,2024VanillaCloveYlang YlangOther Products35.028.317.716.32.7Imports,as a share of total,2024Food suppliesEnergy productsCapital GoodsIntermediate goodsOther Products020406080100120140VanillaCloveYlang YlangOther ProductsFood suppliesEnergy productsCapital GoodsIntermediate goodsOther ProductsExportsImportsExports and imports,in million US$,20240.717.73.07.5122.398.861.957.09.5Source:Central Bank of Comoros,World Bank staff estimatesSource:Central Bank of Comoros,World Bank staff estimates24COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthThe trade deficit narrowed modestly to 26.8 percent of GDP in 2024,as a relative decline in imports outweighed continued weakness in exports.Goods exports contracted by 5.6 percent in nominal terms,driven primarily by sharp declines in vanilla(63 percent)and cloves(25 percent)exports,partially offset by a 38 percent increase in ylang-ylang exports.Consequently,total exports of goods and services fell from 11.4 to 11.2 percent of GDP.While goods imports remained broadly stable in nominal terms,they declined as a share of GDP,reflecting subdued private domestic demand alongside continued reliance on imported essential goods and intermediary products for public investment.Imports of goods and services fell to 38 percent of GDP,contributing to the slight narrowing of the trade deficit from 27.6 percent to 26.8 percent of GDP(Figure 1.19).Figure 1.19:Despite an improved trade deficit,the CAD widened in 2024 Figure 1.20:After a rise in recent years,remittances inflows stabilized in 2024 -4-3-2-10-30-20-10010203020172018201920202021202220232024eCurrent account balance(percent of GDP)Primary and Secondary Incomes(net)Services(net)Goods(net)Current Account Balance(RHS)051015202530201320142015201620172018201920202021202220232024Formal and Informal Remittance Inflows,in percent of GDPFormal Remittance InflowsInformal Remittances InflowsSource:Central Bank of the Comoros,World Bank staff estimatesSource:Central Bank of the Comoros,World Bank staff estimatesSlightly lower net remittances as a share of GDP and higher external debt servicing contributed to the widening of the current account deficit.Remittance inflows grew by 5.4 percent in nominal terms in 2024,supporting private consumption.However,as a share of GDP,they remained broadly stable at 24.9 percent(Figure 1.20).Remittances have historically played a key stabilizing role(Box 3),helping to offset persistent trade deficits.Net remittances(inflows minus outflows)also remained largely unchanged in 2024,falling slightly which together with a structurally high dependence on imported food and energy and an increase in external debt servicing weighed on external balances,contributing to the widening of the current account deficit from 2.6 percent to 3.2 percent of GDP in 2024.Comoros narrow export base continues to limit resilience to external shocks and constrain long-term growth.Accession to the World Trade Organization(WTO)in August 2024,following 17 years of negotiations,presents an opportunity to access new markets and diversify exports over time.However,short-term tariff reductions are expected to reduce customs revenues and could pressure fiscal balances,requiring mitigation measures.WTO-driven fisheries expansion(Box 1)offers a potential high-value export growth path,provided it is supported by complementary investments in port rehabilitation and cold-chain logistics.25COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthFigure 1.21:Formal remittances received grew markedly in recent years Figure 1.22:Net remittances are highly seasonal-15.0-10.0-5.00.05.010.015.020.025.030.0Formal remittances receivedFormal remittances emittedInformal remittances receivedInformal remittances emittedTotal remittances20132014201520162017201820192020202120222023202400.511.522.532021202220232024Remittances(as a share of GDP)Monthly average(2021-2024)JanuaryMarchMayJulySeptemberNovemberJanuaryMarchMayJulySeptemberNovemberJanuaryMarchMayJulySeptemberNovemberJanuaryMarchMayJulySeptemberNovemberSource:Central Bank of the Comoros,World Bank staff estimatesSource:Central Bank of the Comoros,World Bank staff estimatesBox 2:Utilizing Remittances as a Development Lever Remittances represent a key financial flow for Comoros,offering opportunities to advance financial inclusion,climate adaptation,and cultural resilience.Although they occur year-round,they do follow a seasonal pattern with the majority arriving in and around the period for the grands mariages(Figure 1.22).Formal remittance inflows rose from 5.4 percent of GDP in 2013 to 19.5 percent in 2024,now surpassing the combined shares of tourism,fisheries,foreign direct investment(1.2 percent of GDP in 2023),and official development assistance(11.8 percent of GDP in 2023).This steady growth highlights progress in financial access but remains vulnerable to external shocks and structural challenges.Episodes of rising informal remittance flows reveal important stress points.Following Cyclone Kenneth in 2019,informal inflows spiked to 6.7 percent of GDP,representing 31.3 percent of total remittances inflows(from 11.4 percent in 2016),as households relied on cash-based recovery channels.Similarly,the 2022 resurgence to 8.8 percent of GDP coincided with the post-pandemic revival of grands mariages ceremonies,highlighting how cultural and emergency-driven demand strains formal systems.While informal inflows declined to 5.4 percent of GDP in 2024,persistent cash-based transactions reflect both cultural preferences and rural access constraints,despite Comoros achieving a world-leading low formal remittance cost of 1.7 percent(compared to a 6.2 percent global average).Net remittances reached 16.1 percent of GDP in 2024,with outward flows at 4.7 percent of GDP.The persistence of outward remittance flows,particularly informal outflows,points to gaps in financial governance,regulatory enforcement,and domestic savings mechanisms.Although licensing reforms in 2018 initially reduced informal outflows to 2.3 percent of GDP by 2020,inconsistent follow-through limited sustained progress.Surges in both informal inflows and outflows during high-demand periods underscore the need for resilient,flexible formal systems rather than the episodic response to shocks.International experience offers practical models for strengthening the development impact of remittances.9Ghanas tiered licensing framework demonstrates how to formalize flows without excluding small operators,while Senegals diaspora housing programs and Bangladeshs bKash mobile platform illustrate how digital and housing-linked initiatives can channel remittances into productive,resilient investments.Three strategic priorities could enhance the developmental role of remittances:Customized housing microfinance solutions aligned with grands mariages cycles;Climate adaptation financing mechanisms informed by post-disaster recovery needs;Partnerships with mobile money providers to deepen digital financial inclusion.By combining regulatory strengthening with targeted investment channels,Comoros can transform remittances into a more powerful driver of inclusive growth,financial resilience,and climate adaptation while respecting cultural practices that underpin social cohesion.26_9In some countries,tax instruments have been used to channel remittances into productive investments.Morocco for instance introduced tax incentives when remittances are used for productive purposes and not for real estate activities.However,given the low number of taxpayers in Comoros,the priority should be to broaden the tax base and moving remittances into the formal sector before using remittances as a tool to influence other decisions and policies.COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth1.5 Monetary policy:Public borrowing shift and banking vulnerabilitiesA shift toward public sector borrowing and persistent banking sector vulnerabilities underscore rising financial risks and the need for deeper financial sector reforms.Credit growth remained broadly stable in 2024,but a shift toward public sector borrowing signals rising financial sector risks and persistent constraints on private sector development.Domestic credit remained broadly stable at 24.4 percent of GDP in 2024,though its composition shifted significantly toward the public sector(Figure 1.23).Private sector credit growth slowed to 1.6 percent,reducing its share of GDP to from 18.2 to 17.5 percent in 2024,while public sector credit expanded by 22.9 percent to reach 6.9 percent of GDP,up from 5.9 percent a year earlier(Figure 1.24).This shift reflects the widening fiscal deficit,with increased public borrowing absorbing liquidity and heightening financial sector vulnerabilities,including elevated non-performing loan levels.Although external financing partially offset crowding-out pressures,the slowdown in private credit growth suggests weaker private sector demand and/or a reallocation of bank portfolios toward sovereign assets.10 The Central Bank of Comoros has maintained its key monetary policy instrument,the reserve requirement ratio,at 12.5 percent since October 2023,while actively managing liquidity and monitoring credit availability,reserve adequacy,and inflationary dynamics.Despite efforts to bolster private sector development,limited access to affordable credit continues to constrain investment and underscores the need for broader financial sector reforms.Figure 1.23:Credit to the economy has shifted toward more public sector financing Figure 1.24:Growth in credit to the private sector was sluggish in 2024 05101520253020172018201920202021202220232024Credit to the economy,in percent of GDP,2017-2024Domestic credit to Private Sector(percent of GDP)Domestic credit to Public Sector(percent of GDP)Domestic credit(percent of GDP)-10-505101520253020172018201920202021202220232024Public sectorPrivate sectorDomestic credit growthContributions to domestic credit growth,in percentage points,2017-2024Source:Central Bank of Comoros,World Bank staff estimatesSource:Central Bank of Comoros,World Bank staff estimatesDespite some improvements in liquidity and provisioning,the banking sector remains fragile,with persistent non-performing loans,solvency challenges,and high institutional concentration.The financial system comprises 11 institutions:four banks(two of which are state-owned),four microfinance institutions,and three money transfer intermediaries(including the BPC-Banque postale11).The sector is highly concentrated,with Exim Bank,U-Meck,and AFG accounting for 69 percent of total credit and 63 percent of total deposits.Total banking sector assets increased by 10 percent over the year to October 2024,reaching 35.4 percent of GDP,but gross credit declined by 0.3 percent over the same period.Non-performing loans(NPLs)remained elevated at 14.4 percent of total loans,masking wide performance disparities across institutions:Exim Bank reported an NPL ratio of just 2 percent,while AFG,BFC,and SNPSF(Banque postale)recorded NPL rates of 15 percent,53 percent,and 60 percent,respectively.The provisioning rate improved from 55 to 62 percent,and the liquidity ratio strengthened to 40 percent,providing some buffers.However,solvency remains a major concern,with several banks posting negative solvency ratios,negative equity,and losses,highlighting the underlying vulnerabilities within the system.27_10Intermediation rate data is not available.It is then uncertain whether the reluctance or inability to extend credit lies with the banks,or if the private sector is failing to present sufficiently viable projects for financing.11The BPC(Banque Postale des Comores(SNPSF)has recently changed its name to Banque populaire des Comores)COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth1.6 Outlook and Risks:Anticipating modest growth acceleration by 2027 amidst significant downside challengesThe growth outlook is underpinned by strong private consumption and targeted investments aligned with PCE 2030,while structural trade deficits and transitional inflation dynamics weigh on macroeconomic stability.Private consumption and strategic investments are expected to remain the main drivers of Comoros medium-term growth,while trade will likely continue to weigh on the outlook.Private consumption is expected to contribute an average of 3.2 percentage points to GDP growth between 2025 and 2027,supported by the normalization of inflation and strong remittance inflows that bolster household purchasing power(Table 1).Improved budget execution is also projected to support short-term growth through higher public consumption.Investment activity,particularly related to Plan Comores Emergent 2030(PCE 2030)and infrastructure projects linked to the 2027 Indian Ocean Island Games,is expected to contribute an average of 0.6 percentage points to growth.However,persistent structural trade imbalances,driven by a narrow export base and growing import demand linked to consumption and investment,are likely to continue exerting a drag on the overall growth outlook.Supply-side growth will be anchored in blue economy investments and infrastructure upgrades,with services and agriculture driving sectoral contributions.On the supply side,investments under the PCE 2030 and preparations for the 2027 Games are expected to enhance infrastructure and expand productive capacity,particularly in tourism and fisheries.Port modernization,natural resource management,and ecosystem restoration will further support the fisheries sector,which,together with agriculture,is projected to contribute 0.9 percentage points to GDP growth during 20252027.Services,buoyed by tourism and public services,are expected to remain the largest contributor,adding 2.3 percentage points to growth.Despite some expansion in construction,industrial sector growth is projected to remain subdued due to structural constraints.Inflation is projected to decline gradually over the medium-term,supported by structural reforms,despite short-term pressures from food prices and energy supply disruptions.Inflation is expected to moderate over 20252027,converging toward 3 percent by the end of the period(Table 1).This decline will be supported by recent policy measures,particularly the rice import reform,which ended ONICORs public monopoly and introduced a private licensing system.By enhancing competition and diversifying supply sources,the reform aims to improve rice availability,reduce prices,and lower inflationary pressures on staple goods.However,inflation is projected to remain elevated in early 2025,driven by rising food prices and continued electricity supply disruptions.These supply-side constraints may cause temporary price volatility,particularly for essential goods and services.As structural reforms advance and external pressures ease,inflation is expected to stabilize,supporting household purchasing power and private consumption.Sustained and inclusive growth in Comoros will remain constrained without structural transformation and stronger private sector development,as current growth and poverty reduction trends remain modest amid high inequality and demographic pressures.Achieving sustained growth above 4 percent will remain difficult,but even at that level,improvements in living standards are likely to be modest without structural transformation.Comoros has surpassed 4 percent GDP growth only once since 2012.While 4 percent may be a realistic medium-term target,it still represents only a modest improvement over the 20142024 average of 2.4 percent.Given that high population growth will continue eroding per capita income gains,GDP per capita is expected to rise by just 2 percent annually between 2025 and 2027 under current projections.Such incremental gains are unlikely to meaningfully improve livelihoods or reduce poverty.Faster and higher-quality growth will require a cohesive long-term strategy that leverages Comoros natural endowments,particularly its ocean resources,to drive through structural change for increases in productivity,job creation,and resilience.A more strategic use of the countrys blue economy offers one such path forward.28COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthPoverty is projected to decline only slightly as limited GDP growth,high inequality,and weak social protection continue to constrain inclusive development.Using the lower middle-income poverty line of$3.65 per day(2017 PPP),the poverty rate is estimated at 38.1 percent in 2024 and expected to fall marginally to 37.2 percent in 2025.This modest reduction reflects the limited trickle-down impact of GDP growth,which remains too low and narrowly based to drive meaningful poverty reduction.While public investments,such as the Galawa Hotel,El-Maarouf Hospital,and infrastructure tied to the 2027 Indian Ocean Island Games,are expected to support economic activity,they have not been matched by private sector dynamism or targeted employment gains.Persistently high inequality and weak social protection systems limit the reach of growth to lower-income households.Private sector development remains sluggish,constrained by poor access to finance,regulatory barriers,and underinvestment in human capital.Despite strong potential in tourism and fisheries,low productivity and resource misallocation have restricted job creation in these sectors.The prosperity gap remains wide:on average,household incomes would need to rise by a factor of 8.1 to reach the global prosperity benchmark of$25 per day.Comoros current account deficit is projected to widen over the medium term due to structural trade imbalances and infrastructure-related imports,underscoring the urgency of export diversification,strengthening external buffers,and resilient financing strategies.The current account deficit is expected to widen in the near term,driven by energy-related imports and persistent trade imbalances despite long-term export potential.The current account deficit is projected to widen to 4 percent of GDP in 2025(Table 1).In early 2025,Comoros imported six electricity generators,valued at 0.3 percent of GDP,to address worsening power shortages that disrupted production and increased costs.While these investments are essential to alleviate structural energy constraints,they will exacerbate the trade deficit in the short term.WTO accession provides an opportunity to access new markets,but proactive export promotion will be needed to mitigate revenue losses from tariff reductions.12 Service exports are expected to gain momentum by 2027,led by a surge in tourism during the Indian Ocean Island Games,which could support external balances if infrastructure is delivered on time.However,these gains may be partially offset by continued high goods imports,particularly of consumables,reflecting Comoros structural dependence on imports to meet domestic demand.Trade imbalances are expected to persist over the medium term,reinforcing external vulnerabilities and underscoring the urgency of export diversification and stronger external buffers.Despite a gradual recovery in goods exports,Comoros import-intensive growth model is projected to widen the trade deficit by 0.8 percentage points through 2027.While remittance inflows are expected to increase and provide some cushion,they will not fully offset the rising import bill.The current account deficit is therefore projected to reach 5 percent of GDP by 2027.Accelerating blue economy development could support export diversification,particularly in fisheries and agriculture,helping to reduce trade and fiscal gaps over time.WTO accession may also enhance competitiveness,though recent US tariff announcements,while unlikely to have direct effects due to low bilateral trade,highlight Comoros exposure to global external shocks.Without reforms,rising external and fiscal pressures could exacerbate macroeconomic vulnerabilities,emphasizing the need for policies that expand exports,build external buffers,and ensure sustainable infrastructure financing.With modest revenue gains,rising expenditure pressures,and elevated debt vulnerabilities,Comoros must strengthen domestic revenue mobilization,improve public spending efficiency,and pursue concessional or blended financing to sustain its investment ambitions and preserve fiscal sustainability.Domestic revenue mobilization is advancing through tax policy and administrative reforms,but structural constraints and declining trade taxes will limit gains.Comoros is implementing measures to strengthen domestic revenues,such as improving compliance through administrative modernization.These efforts are expected to raise direct tax revenues,from personal income tax,corporate income tax,and consumption taxes,from 8.3 to 8.8 percent of GDP by 2027.However,trade liberalization under WTO accession is expected to reduce customs receipts,which represent a significant share of total revenue.Given that Comoros receives such a small amount of global aid,it is not expected that cuts to 29_12WTO accession opens broader market access and can lower input costs for local firms.Because tariff revenues will decline over time,complementary export promotion measures will be required to protect overall revenue while the economy reaps the benefits of expanded trade.COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growthaid budgets globally will affect Comoros and grants are projected to remain stable.Total revenues and grants are expected to increase only modestly to 16.7 percent of GDP by 2027(tax revenues will only modestly increase to 8.6 percent of GDP).Sustained improvements in domestic revenue performance will be essential to reduce aid dependence and create fiscal space for development spending.Improving the efficiency of public spending and strengthening oversight of fiscal risks are critical to ensuring value for money and preserving fiscal sustainability.Capital expenditures are projected to stabilize at 8.2 percent of GDP over 20252027,primarily targeting infrastructure and tourism-related investments linked to the 2027 Indian Ocean Island Games.With limited fiscal space,high fiscal rigidity(with current expenditures representing more than half of total expenditures),13 and rising debt service costs,enhancing the efficiency of public investment is essential.Key priorities include transparent budgeting,stronger project appraisal systems,and alignment with long-term development goals.Addressing contingent liabilities in state-owned enterprises and improving procurement transparency will be crucial to contain fiscal risks and improve spending credibility.Provided current expenditures remain contained and capital spending is well-prioritized,the fiscal deficit is projected to narrow to 3.1 percent of GDP by 2027.Given high debt vulnerabilities and limited domestic revenues,major infrastructure investments must be financed through concessional or blended sources to ensure sustainability.Public debt is projected to stabilize at 37.8 percent of GDP by 2027,but Comoros remains at high risk of debt distress.Rising infrastructure financing needs,particularly those linked to the 2027 Indian Ocean Island Games,and constrained revenue performance underscore the importance of securing grants,concessional borrowing,or blended finance arrangements.A prudent financing strategy,perhaps as part of a mid-term debt strategy and annual borrowing plan framework,will be essential to maintain debt sustainability while advancing critical investment priorities under the PCE 2030 framework.1430_13See World Bank.2023.2022 Comoros Public Expenditure Review,for a detailed study.incentives when remittances are used for productive14The Debt Management Performance Assessment(DeMPA)for Comoros evaluated the countrys capacity to perform forward-looking debt analysis.The assessment highlighted significant progress in establishing a robust legal framework,which serves as a solid foundation for effective debt management.However,the evaluation also identified several challenges that need to be addressed to enhance the countrys ability to conduct comprehensive debt analysis in the near term.These challenges include limitations in staff capacity,the need for improved intergovernmental coordination,and data access.The government is actively working to overcome these obstacles to strengthen its debt management capabilities.COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthTable 1:Key Macroeconomic Indicators,2020-2027 20202021202220232024e2025f2026f2027f(Annual percent change,unless indicated otherwise)National accounts and pricesGDP at constant prices-0.22.12.83.03.43.73.84.0Private consumption3.81.00.21.93.23.73.43.8Government consumption4.15.05.411.6-2.31.32.83.2Gross fixed investment-14.49.6-62.269.8-13.34.37.16.6Exports of goods and services-46.348.2100.8-10.14.64.95.55.5Imports of goods and services-9.37.7-4.08.2-4.33.74.55.0(Sectoral contribution to growth)Agriculture(ppts)1.10.9-0.71.00.90.90.90.9Industry(ppts)-0.70.01.40.40.50.40.30.4Services(ppts)-1.21.01.71.41.92.12.32.4InflationGDP deflator average0.6-1.25.32.92.01.81.61.8CPI(annual average)0.80.012.48.55.04.03.33.0Money and creditNet credit to government-22.070.384.6-17.522.9Domestic credit to the private sector-5.913.313.512.81.6Broad money11.520.18.08.74.6External sectorExports fob-54.994.824.5-10.94.38.28.47.8Imports fob-2.614.622.45.53.67.57.97.2Terms of trade-21.823.5-12.8-1.5-7.8-0.5-0.50.1(In Percent of GDP,unless otherwise indicated)Current Account Balance(incl.grants)-1.9-0.5-0.6-2.6-3.2-4.0-4.6-5.0Foreign Direct InvestmentDebtPublic debt(external and domestic)26.328.334.134.836.837.638.037.8External debt23.425.427.427.929.931.031.631.7Debt service0.80.81.61.62.1Fiscal accounts Total revenue and grants18.317.014.116.516.616.316.616.7 Total expenditure and net lending18.819.818.017.820.520.019.919.7 Overall fiscal balance(with grants)-0.5-2.8-3.9-1.3-3.9-3.7-3.3-3.1Memorandum itemsGDP per capita(%)-2.20.10.81.01.51.81.92.2Gross International Reserves(in US$,end of period)269.8327.9266.4304.1324.3 In months of imports of goods and services9.410.06.67.27.4Nominal GDP(in billions of KMF)527.1532.1575.8610.3644.1679.9717.2759.1Nominal GDP in US$(millions)1222.81234.21189.21301.51383.91471.31557.11645.1Note:e:estimated;f:forecasted.Source:National authorities,World Bank,and IMF estimates.31COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthProjected macroeconomic stability and opportunities for sustainable and inclusive growth are tempered by significant downside risks.Comoros faces significant downside risks to its economic outlook from climate shocks,fiscal vulnerabilities,global instability,and weak governance,all of which threaten growth,poverty reduction,and long-term resilience.Multiple interlinked risks could undermine Comoros development trajectory.Climate change poses a growing threat,with over half the population living in high-risk areas and the country ranked 29th in climate vulnerability.Past shocks,such as Cyclone Kenneth(which caused damages amounting to around 10 percent of GDP),global food and fuel price surges,the COVID-19 pandemic,and a 2024 cholera outbreak,have exacerbated poverty and unemployment.These shocks also exposed households dependence on informal remittance flows during crises,highlighting the need to formalize diaspora finance as part of a climate adaptation strategy.Fiscal risks are elevated,with potential SOE contingent liabilities adding to debt vulnerabilities,while high non-performing loans and low bank equity further threaten financial stability.15 Persistent deficits and limited fiscal space constrain the governments ability to invest in resilience or expand social protection.Governance challenges,including weak tax administration and low human capital investment,further erode policy effectiveness.Youth unemployment remains high,formal job creation is limited,and migration pressures are rising,which may also drive social unrest.While Comoros is not well integrated into global trade and has no direct bilateral trade with the United States,heightened global uncertainty,such as from US reciprocal tariffs,could still affect the country through indirect channels,including commodity prices,remittances,supply chains,exchange rates,and investment.The convergence of economic,climate,and institutional risks underscores the urgency of comprehensive domestic reforms to support inclusive and sustainable development.1.7 Policy Options:Paving the way towards more efficient,sustainable,and inclusive growthStrengthen Fiscal Sustainability and Debt ManagementComoros should boost revenues,control spending,and improve debt management to strengthen its vulnerable fiscal position.Comoros fiscal position is under strain,with public debt rising to 37 percent of GDP in 2024 and domestic revenue mobilization lagging at just 8 percent of GDP,one of the lowest rates globally.The recent WTO accession risks further eroding trade-related revenues,underscoring the urgency of broadening the tax base,modernizing tax administration,and eliminating inefficient exemptions.Reforms to enhance public financial management,including stricter expenditure controls,SOE governance improvements,and transparent debt reporting,are critical to creating fiscal space for growth-enhancing investments.Given Comoros high risk of debt distress,reforms to improve debt management and transparency as well as reliance on concessional financing and careful monitoring of contingent liabilities,particularly from underperforming SOEs,will be essential to safeguard macroeconomic stability.Boosting Private Sector Development and Export CompetitivenessRemoving regulatory barriers,improving access to finance,and leveraging remittances can unlock private sector potential.The private sector remains constrained by regulatory barriers,limited access to finance,and competition distortions from SOEs,which dominate key sectors.Streamlining business licensing,enforcing competition laws,and improving creditor rights would level the playing field for SMEs.Leveraging WTO accession to diversify exports requires complementary investments in trade logistics and quality standards for high-potential sectors like fisheries and agriculture.Additionally,formalizing remittance flows(approximately 300 million annually)could help channel diaspora resources into productive investments,catalyzing private sector growth.32_15Certain SOEs have negative market value,high operating costs from human resources,and arrears on tax payment to government.In addition,the financial sector is exposed to SOEs through loans,which could become a liability.COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthEnhancing Financial Sector Stability and InclusionBanking sector reforms should address NPLs,strengthen supervision,and expand financial inclusion.Persistent vulnerabilities in the banking sector,including high NPLs totalling approximately 14 percent of total loans,liquidity constraints,and weak supervision,threaten financial stability and limit credit flow to the private sector(18 percent of GDP).Priorities include strengthening bank resolution frameworks,modernizing payment systems,and improving collateral mechanisms to encourage long-term lending.Expanding financial inclusion through digital services and targeted support for microfinance institutions(which hold 47 percent of sector assets)would help integrate informal businesses and households into the formal economy.Concurrently,reforms to regulate the fast-growing but unstable microfinance sector are needed to mitigate risks.Improving Governance and Public Sector EfficiencyStrengthening PFM,SOE governance,and decentralization is critical for fiscal discipline and service delivery.Weak governance undermines fiscal discipline and service delivery,with budget execution deviations reaching 40 percent and SOEs operating without transparent financial reporting.Reforms should prioritize public financial management(PFM),including medium-term budgeting,internal audit capacity,and full adoption of the Integrated Financial Management Information System(IFMIS),to enhance transparency and accountability.SOE restructuring is critical to reduce fiscal risks,while decentralization reforms,such as through clarifying fiscal transfers to local governments,would improve service delivery.Strengthening the judiciary and anti-corruption frameworks would further bolster investor confidence and private sector trust in institutions.33COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthTable 2:Policy Options Reform Challenges Policy OptionsCriticality/impactShort-term(12 months)Medium/Long-term(12 to 36 months)Strengthen Fiscal Sustainability and Debt ManagementModernize and simplify tax exemptions to broaden the tax base and maximize tax revenue whilst maintaining flexibility for key or strategic industries(Ministry of Finance)Clarify the responsibilities of the four offices of the Directorate of Public Debt and restructure the Directorate,including adequate staffing and procedure manuals(Ministry of Finance)Modernize the consumption tax regime to mitigate WTO tariff losses(Ministry of Finance)Adopt a medium-term expenditure framework,a medium-term revenue strategy,and a medium-term debt management strategy and accompanying annual borrowing plan to strengthen forward-looking planning,align resources with development and policy goals,enhance budget credibility,and reduce deviations.(Ministry of Finance)Approve SOE restructuring plans to reduce contingent liabilities and improve non-fiscal income(Council of Ministers)WTO tariff losses exacerbating revenue shortfallsMounting debt service obligations jeopardizing fiscal sustainabilityContinuation of contingent liabilities eroding fiscal space for development Boosting Private Sector Development and Export CompetitivenessOperationalize the SME Credit Guarantee Fund within 12 months to increase credit to the private sector(Central Bank)Enforce 2020 Investment Code regulations to streamline business licensing and strengthen investor protections(Ministry of Economy)Accelerate Port Boingoma rehabilitation utilizing$60M in committed donor funding to reduce trade logistics costs(Ministry of Transport)Facilitate digital remittance channels to mobilize 300M annual diaspora flows into formal SME financing(Ministry of Finance)Continue liberalizing the rice sector and begin liberalizing the vanilla sector by reducing export licensing barriers and implementing EU-compliant quality standards(Ministry of Economy)Missed WTO opportunities leaving exports uncompetitiveInformal sector dominance perpetuating low productivityStagnant GDP growth(5%GDP annuallyEroded trust in institutions deterring FDI35COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth36Chapter 2:The Blue Economy as a Driver of Sustainable Growth in ComorosThe Blue Economy approach is defined as the sustainable use of ocean resources for economic growth,improved livelihoods,and job creation while preserving the health of ocean ecosystems.Specifically,the Blue Economy requires that the development of individual oceanic sectors be pursued in an integrated fashion,and with a view to managing their impacts on ocean health.The Blue Economy aims to align economic development opportunities with ocean health to foster low carbon,resource-efficient growth that creates jobs and reduces poverty.It recognizes the triple bottom-line objectives of financial,social,and environmental sustainability.This challenge is made even greater by the fact that,contrary to land-based activities,oceanic sectors operate mostly in a public goods setting,where user rights and property rights are not clearly defined,which leads to many instances of the Tragedy of the Commons.16Comoros has immense natural wealth and harnessing it sustainably can unlock a brighter,more prosperous future for all.In 2020,Comoros natural capital per capita was estimated at$3,838,yet its GDP per capita stood at just$1,363,approximately a third of that value.17 This stark disparity underscores the countrys struggle to convert its natural wealth into meaningful economic development.Persistent challenges,including volatile economic output,rapid population growth,and the degradation of natural capital,have led to near stagnation in GDP per capita since 1995(Figure 2.1).Over the same period,natural capital per capita has declined significantly,from$6,286,signalling a narrowing window to harness these resources for economic progress.The annual cost of environmental degradation,$274 million from land degradation alone,further highlights the urgent need for a sustainable development pathway.Despite possessing the 12th highest fisheries wealth per capita globally and the joint 2nd highest in Africa(Figure 2.2),this potential remains largely untapped.Urgent action is needed to leverage these resources effectively and achieve the goals of the Plan Comores Emergent 2030(PCE 2030 Figure 2.3).18 Strengthening governance frameworks,such as updating the National Environmental Policy(PNE)and the Framework Law of the Environment(FLE),will be critical to ensuring that natural resource management supports long-term economic growth.This reports macroeconomic model projects that realizing Comoros blue economy potential could lift GDP growth to 6.1 percent annually,putting the country on track for upper-middle-income status by 2050.19Figure 2.1:Comoros GDP per capita(constant 2015 US$)has remained broadly unchanged over the last three decades Figure 2.2:Comoros possesses one the highest fisheries wealth per capita in Africa 0200400600800100012001400199519971999200120032005200720092011201320152017201920212023GDP per capita,Constant 2015 USD050100150200250300350400450Fisheries,per capita,chained 2019 USDSource:WDI World BankSource:The Changing Wealth of Nations(2024)World BankCOMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable Growth37_16 World Bank(2021)Riding the Blue Wave:Applying the Blue Economy Approach to World Bank Operations.Washington,D.C.:World Bank17 GDP per capita figure World Bank calculations;Natural wealth per capita The Changing Wealth of Nations(2024)World Bank18 The PCE is based on five strategic pillars:(1)tourism and entrepreneurship,(2)an established blue economy of the Comoros,(3)a hub for financial services and logistics in the Indian Ocean,(4)modernized agriculture for food security,and(5)industrial niches to diversify economy.19 A Growth and Jobs Model was developed specifically for this chapter to act as a proof of concept of what may be possible for Comoros with the right investments.The model is an adaptation of the World Bank Macro Fiscal Model used for macroeconomic forecasting for the Annual and Spring Meetings each year.COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthA blue economy focus can support the governments development objectives by anchoring partner engagement around a pillar that can drive sustainable growth.The blue economy presents a transformative opportunity for Comoros to break this cycle.By restoring and sustainably managing its natural capital,the country can drive inclusive economic growth while addressing long-term development challenges.With an Exclusive Economic Zone(EEZ)86 times larger than the countrys total land spanning 160,000 square kilometres,abundant marine resources,and a strategic location in the Indian Ocean,Comoros is well-positioned to develop fisheries and marine tourism as key economic drivers.This aligns with the objectives of the PCE 2030,which prioritizes sustainable resource management and climate resilience.However,unlocking this potential requires targeted investments,governance reforms,infrastructure upgrades,and environmental safeguards.A well-executed blue economy strategy can enhance food security,create jobs,stimulate private sector growth,and build climate resilience while fostering long-term economic diversification,paving the way for a more prosperous and sustainable future.Investments in critical infrastructure,particularly in energy,maritime transport,and inter-island connectivity,will be necessary to support this transformation.Without reliable electricity and efficient transportation networks,efforts to modernize fisheries and expand tourism will be constrained.Figure 2.3:Plan Comores mergent 2030 Strategic Pillars Plan Comores mergentTourism andentrepreneurshipAn establishedBlue Economyof the ComorosIndustrialniches to diversifythe economyModernizedagriculture forfood securityA hub forfinancial servicesand logistics in theIndian OceanSource:Adapted from UNDP 20192.1 Sector Strategies for a Sustainable Blue Economy2.1.1.FisheriesFisheries are central to Comoros economy but suffer from outdated practices,weak infrastructure,and limited market access.Fisheries are vital to Comoros livelihoods and food security,representing 78 percent of GDP until 2017 before rising to 11.4 percent(20182024),highlighting its increasing contribution to the Comorian economy(Figure 2.4).However,the sector remains constrained by limited infrastructure,outdated practices,and weak market access.Predominantly artisanal,the sector struggles with small-scale operations,lacking modern vessels,cold storage,and processing facilities.Most fish are consumed locally and sold informally,limiting economic returns.Modernizing fisheries systems,expanding renewable energy,and improving connectivity are critical to unlocking sector potential.Empowering fishing communities with better tools,clean energy,and market access can transform fisheries into a driver of sustainable growth.Expanding cold storage,processing infrastructure,and renewable energy solutions is essential to reduce post-harvest losses,currently over 30 percent,and boost competitiveness.Reliable electricity access is critical for operating cold chains and processing plants;scaling up renewable energy generation and modernizing the electricity public utility,SONELEC(La Socit Nationale dElectricit)are necessary enablers.38COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthFigure 2.4:The Blue Economy has a substantial,yet undeveloped impact on the GDP 051015202530352010-20142015-20192020-2024Fisheries(as a share of GDP)Fisheries(as a share of primary sector GDP)Fisheries(annual growth)012345672010-20142015-20192020-2024Tourism(as a share of GDP)Tourism(as a share of tertiary sector GDP)Tourism(annual growth)Source:INSEED and World BankSource:INSEED and World BankExpanding financial services,especially for women and MSMEs,can drive entrepreneurship and sector resilience.Women play a significant role in post-harvest activities but remain vulnerable to environmental and market shocks.Strengthening financial inclusion for women and MSMEs,through tailored credit products and support for locally owned businesses,can unlock new private sector opportunities.Linking fisheries to tourism and agriculture supply chains would ensure broader economic spillovers.Strengthening health and safety protections will enhance productivity and labor force participation in fisheries.Sustainable fisheries development also requires investments in workforce health and safety.Fishers face occupational hazards that demand improved healthcare access and workplace protections.Promoting the consumption of sustainably sourced seafood can further support local economies and public health.Strong governance and decisive action against illegal,unreported,and unregulated(IUU)fishing are essential for sustainability.Strategic governance reforms are needed to modernize the sector,expand semi-industrial and aquaculture operations,and combat IUU fishing.The PCE 2030 vision prioritizes co-management approaches and stronger enforcement to safeguard marine resources.Rehabilitating ports and investing in resilient maritime transport will connect producers to markets and boost competitiveness.Port rehabilitation,improved maritime transport,and workforce training are crucial for expanding export-driven fisheries.Upgrading key ports(Moroni,Mutsamudu,Boingoma)and ensuring climate-resilient,green port infrastructure will facilitate trade and lower transport costs.Better inter-island ferry services and vocational training in fishing,aquaculture,and seafood processing will enhance sector productivity and sustainability.Upgrading fishing fleets and linking them to domestic processing can open higher-value export and tourism opportunities.Developing a semi-industrial fleet would allow Comoros to capitalize on abundant tuna stocks,aligning fisheries with domestic processing industries that can supply hospitality and export markets.Investments in modern infrastructure and renewable energy will be critical to realize these opportunities.Scaling sustainable aquaculture offers a pathway to diversify incomes and reduce pressure on wild fish stocks.Diversification into sustainable aquaculture,such as shrimp and seaweed farming,can reduce pressure on wild fish stocks and boost incomes.Scaling aquaculture will require investments in hatcheries,farming infrastructure,and regulatory frameworks.Meanwhile,adopting maritime spatial planning(MSP Box 2)can balance fisheries,tourism,and conservation,as demonstrated by successes in Seychelles.39COMOROS ECONOMIC UPDATE JUNE 2025 An Ocean of Opportunities-Blue Economy as a Driver of Sustainable GrowthBox 3:Maritime Spatial Planning As Comoros weighs how to balance blue economy development with conserving the very ocean on which that development depends,a relatively new management tool,maritime spatial planning(MSP),stands out as especially promising to address the challenge.The expansion of the blue economy will necessarily require improved management of the coastal and marine environment,reduced pressures on key natural resources,and ensuring long-term sustainability of natural capital or ecosystem services.Since Comoros does not yet employ an MSP system,there is an opportunity to build on international experiences to inform the next steps,including definition of objectives,the geographic boundary of the plan,expected timeline of results,data to be gathered,modalities of stakeholder involvement,and implementation.An MSP is different from the usual way that decisions are made in the marine environment in that it is an integrated process to reconcile multiple ecological,economic,and social objectives.UNESCO defines it as“a practical way to create and establish a more rational organization of the use of marine space and the interactions between its uses,to balance demands for development with the need to protect marine ecosystems,and to achieve social and economic objectives in an open participatory and planned way.”(Ehler and Douvere,2009).MSP is usually specified through a political process and involves stakeholder participation.Globally,22 countries have completed,approved,or implemented MSPs,and plans are under way in 12 more countries.These plans range from unregulated MSPs that provide policy direction to regulated ones t
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