Bissau economy seen growing at 3.5 pct in 2010: IMF

BISSAU (Reuters) - Guinea-Bissau's cashew nut-driven economy will grow at 3.5 percent in 2010 but could touch 4 percent if the global economy recovers and the volatile nation finds some stability, the International Monetary Fund said.

The tiny West African nation has been wracked by instability since independence from Portugal and this year lost its president, head of the army and several senior politicians in a slew of assassinations, which some analysts have linked to the country's role in the international cocaine trade.

Malam Bacai Sanha won a peaceful July election to replace slain President Joao Bernardo Vieira but the country is in dire need of international support for economic reforms and a revamping of the military, which has long-meddled in politics.

"Maintaining political stability and reinforcing the security sector are essential for re-launching the economy," Paulo Drummond, head of the IMF mission to Bissau said on Thursday.

Drummond, whose team has been in the country since November 5, said that the IMF believed a growth rate of 3.5 percent in 2010 was feasible, so long as the world economy recovered and the cashew nut industry performed well.

The economy grew at just under three percent in 2009 but could touch four percent further down the line, he added.

Currently engaged in an emergency, post-conflict assistance programme, the IMF and the authorities in Bissau will start negotiations on a medium-term agreement in early 2010, he said.