Gabon Economic Outlook
One of Central Africa’s largest hydrocarbon producers, Gabon is gradually recovering from the unfavorable economic climate created by lower energy prices. Despite oil production declining by 4.3%, real GDP growth reached an estimated 2.0% in 2018, up from 0.5% in 2017. The upturn was spurred by nonoil sectors, particularly commercial agriculture (13% growth), manganese mining (45%), logging (14%), lumber (10%), and telecommunications (18%). Unemployment remains a major concern because the hydrocarbon sector, the primary driver of the economy, generates few jobs and because the economic crisis’s impact on employment can be only partially offset by other economic sectors, such as wood processing and export agriculture.
The fiscal deficit improved from 6.6% in 2016 to 3.6% in 2017 to an estimated 0.3% in 2018, largely through fiscal consolidation, a component of the Central African Economic and Monetary Community (CEMAC) response to reduced oil prices. Gabon concluded a three-year agreement (2017–19) with the International Monetary Fund for an Extended Credit Facility, supported by the African Development Bank and other international partners.
One important move by the Bank of Central African States in 2018 was to tighten monetary policy while raising the interest rate from 2.95% to 3.5%. Inflation was an estimated 2.8% in 2018, down from 3.0% in 2017 and below the CEMAC requirement of 3%.
The current account deficit dropped to 1.5% of GDP in 2018 from 4.9% in 2017. Despite lagging oil production, total export revenue has increased thanks to stable oil prices as well as lumber and manganese exports.
Tailwinds and headwinds
Short-term outlooks project real GDP to grow by 3.4% in 2019 and 2020. Growth will be spurred by nonoil sectors (agriculture, mining, and manufacturing) thanks to the ongoing diversification of the productive base of the economy. On the demand side, exports (6.3% growth) and investment (3.0% growth) will be the primary growth factors. Inflation is projected to remain low at 2.3% in 2019 and 2.5% in 2020. The budget balance and current account balance are also projected to improve.
The growth outlook will hinge on authorities’ ability to continue implementing reforms to consolidate the macroeconomic framework. Sound budget execution and cash flow management will be important to avoid the recurrent problem of accumulating external arrears, which reduces the country’s solvency. Given the weight of the oil sector, another risk factor is declining oil production, particularly if new fields do not become productive.
Like other CEMAC countries, Gabon faces serious challenges. These include low reserves, low economic activity, and insufficient protection for the most vulnerable groups of the population. To overcome these challenges and shore up progress, Gabon must remain aligned with the coordinated efforts of CEMAC countries and continue the fiscal consolidation already under way. To this end, Gabon must protect priority expenditures and continue reforms aimed at improving the business climate and governance to stimulate growth and diversification of the economy, with the private sector the main growth catalyst.
Gabon views structural transformation of the economy as a key development strategy. Specifically, Gabon has promoted the local processing of timber, palm oil, and manganese. As a result, manufacturing accounted for roughly 10% of GDP in 2017, compared with 6% in 2012.
A timber processing industry emerged in Gabon after the 2009 ban on the export of raw logs. This has been made possible through a special economic zone and public–private partnerships. Gabon is now Africa’s largest exporter of wood veneers and plywood and one of the world’s top 10 producers.
Three plants for processing palm oil have opened. The country is exporting palm oil-derived products, which has boosted the agrofood sector.