Equatorial Guinea Economic Outlook
Despite rising oil prices, real GDP contracted by an estimated 7.9% in 2018, compared with 2.9% in 2017, continuing a recession due to lower oil prices and weak economic diversification that led to a total contraction of about 29% from 2015 to 2018. The primary factor in the decline was reduced yields at working oil wells, which lowered oil output by 14%. The country still depends heavily on hydrocarbons, which in 2017 accounted for 56% of GDP, 95% of exports, and 80% of fiscal revenues.
The budget deficit fell to 0.9% of GDP in 2018, from 2.9% in 2017 and 8.6% in 2016, thanks to substantially lower government spending (capital and operating expenditures) combined with improved revenue collection. Inflation was moderate at an estimated 0.6% in 2018, down from 0.7% in 2017, thanks to Central African Economic and Monetary Community (CEMAC) membership and lower prices of foodstuffs and nonalcoholic beverages.
Tailwinds and headwinds
The CEMAC strategy for reducing fiscal and external imbalances caused by lower oil prices should continue to have positive impacts in Equatorial Guinea. After reducing the fiscal deficit to a projected 0.5% of GDP in 2019, the budget balance is projected to turn to a surplus of 0.3% in 2020. Inflation is projected to be 1.4% in 2019 and 1.9% in 2020, below CEMAC’s 3% requirement.
Real GDP is projected to further contract by 2.7% in 2019 and 2.5% in 2020 due to lower hydrocarbon production and fiscal adjustments. The government is relying on additional foreign direct investment in the oil sector to boost production in the medium term, with positive growth expected from 2021.
Additional government efforts are needed to continue macroeconomic consolidation undertaken with the International Monetary Fund, particularly with regard to external accounts; enhance human capacities overall, and particularly in public policy design and implementation; transform agriculture to diversify the economy; ensure efficient use of the improved infrastructure the country has acquired in recent years; and revive the hydrocarbon sector, the driving force of the economy, to fully capitalize on rising oil prices.
Like other CEMAC countries, Equatorial Guinea faces serious challenges, including low reserves, weak economic activity, and insufficient protection for the most vulnerable groups of the population. To overcome these challenges and shore up progress, the country must remain aligned with the coordinated efforts of CEMAC countries and continue the fiscal consolidation already under way. To this end, Equatorial Guinea must protect priority expenditures and continue reforms aimed at improving the business climate and governance to stimulate growth and diversification, with the private sector becoming the main growth catalyst.
Governance also presents a challenge. Weaknesses include limited access to information; procedural inefficiencies in public finance management in planning, execution, oversight, transparency, and accountability; and inadequate institutional resources and systems, particularly a lack of qualified staff to ensure good dayto- day administrative management and implementation of reforms.
Over the past two decades, Equatorial Guinea has used oil revenues to invest heavily in infrastructure (such as transport and energy) to sustain an upward development trajectory.
In line with the community efforts of CEMAC countries, authorities now seem prepared to implement additional reforms to promote growth and economic diversification. In 2019, they will revise the National Economic and Social Development Plan to stimulate nonoil growth. The updated plan aims to diversify the economy and improve the business climate.