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Equatorial Guinea Economic Outlook
Recent macroeconomic and financial developments
Real GDP grew 3.1% in 2022, after contracting 0.9% in 2021, driven by the strength of the nonoil sector. Growth was also boosted by household demand. The budget surplus widened to 4.8% of GDP in 2022 from 2.6% in 2021. Public debt dropped from 42.8% of GDP in 2021 to 27.1% in 2022. Inflation was an estimated 5% in 2022, after 1.3% deflation in 2021, due to higher food prices resulting from Russia’s invasion of Ukraine. The Bank of Central African States raised the marginal lending rate from 5.25% to 5.75% in March 2022 and the compulsory reserve ratio to 7% on demand liabilities and 4.5% on term liabilities.
Economic recovery widened the current account surplus to 3.9% of GDP in 2022 from a deficit of 4.0% in 2021. International reserves rose from 2.7 months of import cover in 2021 to 3.5 months in 2022, above the target of 3 months. Higher prices for consumer goods and transportation reduced household purchasing power and accentuated urban poverty, which reached 67% of the population during the COVID-19 pandemic, leading to an overall poverty rate of 67% in 2022.
Outlook and risks
Real GDP is projected to decline 1.4% in 2023 and 6.3% in 2024 due to aging oil wells and the effects of Russia’s invasion of Ukraine. The budget deficit is projected to narrow to 2.5% of GDP in 2023 and 3.9% in 2024. The current account deficit is projected to continue to widen, to 8.1% of GDP in 2023 and 9.0% in 2024. To reduce the social impact of higher food and energy prices, the government is negotiating with foreign suppliers of basic foodstuffs to facilitate imports, including through transportation subsidies. Inflation is thus projected to fall to 4.0% in 2023 and 2.2% in 2024 due to government measures to mitigate the effects of rising food prices. But the prospect of lower oil prices combined with aging oil wells is a risk for planned social programs.
Climate change issues and policy options
Estimated climate finance need over 2020–30 is $6.7 billion, or $620 million a year. Estimated finance mobilized in 2020 was $41 million—$3 million (8%) from the private sector and $37 million (92%) from the public sector. Private finance comes exclusively from institutional investors, and public finance comes principally from multilateral development finance institutions ($32 million, or 78%), multilateral climate funds ($4 million, or 9%), and the government ($2 million, or 4%). Forestry and other land use and fishing account for $32 million (80%), and multisector activities account for $8 million (20%). The country has considerable natural capital, including the Congo Basin, a major source of carbon credits and climate resilience. It is also rich in bays, rivers, and mangroves; has a well developed river system; and maintains a maritime environment that favors productivity in economically valuable fisheries resources that could contribute to climate finance and green growth. However, the government needs to put in place a regulatory environment and policies that incentivize this type of financing.
