IMF Executive Board Concludes 2016 Article IV Consultation with the Republic of Equatorial Guinea
IMF News, September 8, 2016
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- Published: September 8, 2016
Economic performance and outlook
- Real GDP growth averaged -0.5 percent from 2010-14, driven by a trend decline in the hydrocarbon sector.
- Economic contraction following the 2014 oil-price shock:
- 2015: overall economic activity declined by 7.4 percent.
- Hydrocarbon activity fell 8.9 percent in 2015.
- Non-hydrocarbon activity slumped by 5.2 percent in 2015.
- Deterioration in the terms of trade widened the current account deficit to -16.8 percent of GDP (2015).
- Inflation: 0.6 percent during Q2 2016, down from over 4 percent in 2014.
- Near-term outlook:
- 2016 overall economic activity expected to decline by nearly 10 percent.
- Medium-term growth is unlikely given the large weight of hydrocarbons and fiscal consolidation effects on non-hydrocarbon activities.
- Pace of contraction should lessen as the national development strategy shifts focus to human resource development and new non-hydrocarbon growth drivers.
Fiscal position and public finances
- Fiscal adjustment reduced the overall deficit from -4.9 percent of GDP in 2014 to -3.2 percent in 2015.
- Fiscal position remains under pressure; deficit financing has required domestic borrowing via central bank credit and use of government deposits.
- Government finance indicators (percent of GDP):
- Revenue: 24.9 (2013), 24.3 (2014), 25.3 (2015), 22.8 (2016), 21.2 (2017), 19.5 (2018), 19.1 (2019), 18.3 (2020), 17.? (2021—table ends at 2019–2021 projection format). [Note: preserve only values explicitly shown in table]
- Of which: resource revenue: 21.4 (2013), 21.0 (2014), 20.4 (2015), 16.5 (2016), 14.3 (2017), 12.4 (2018), 11.7 (2019), 10.5 (2020), 9.6 (2021)
- Expenditure: 30.7 (2013), 29.2 (2014), 28.5 (2015), 28.1 (2016), 26.5 (2017), 24.5 (2018), 22.5 (2019), 20.5 (2020), 19.2 (2021)
- Overall fiscal balance after grants: -4.9 (2013), -3.2 (2014), -5.3 (2015), -3.4 (2016), -2.2 (2017), -1.3 (2018)
- Non-resource primary balance (percent of non-hydrocarbon GDP): -66.1 (2013), -61.1 (2014), -44.2 (2015), -36.7 (2016), -33.1 (2017), -29.0 (2018), -24.6 (2019), -20.0 (2020), -16.9 (2021)
- Gross government deposits (billions of CFAF): 1,226 (2013), 913 (2014), 862 (2015), 655 (2016), 466 (2017), 424 (2018), 451 (2019), 516 (2020), 642 (2021)
- Directors urged increasing the pace of consolidation, mobilizing non‑resource revenues, rationalizing tax exemptions, and improving investment efficiency.
- Recommended prioritization of ongoing projects while retaining investment in social development, particularly in health and education.
- Suggested comprehensive review of tax policy and development of debt management capacity, supported by IMF technical assistance as needed.
External sector and debt
- Current account balance (including official transfers; - = deficit): -16.8 (2015), -11.8 (2016), -6.6 (2017), -5.9 (2018), -4.8 (2019), -3.5 (2020)
- Outstanding medium- and long-term public debt (percent of GDP): 6.1 (2013), 8.7 (2014), 14.0 (2015), 19.6 (2016), 21.9 (2017), 25.9 (2018), 29.1 (2019), 31.7 (2020), 33.7 (2021)
- Debt service-to-exports ratio (percent): 2.5 (2013), 2.2 (2014), 7.6 (2015), 11.9 (2016), 21.6 (2017), 24.2 (2018)
- External debt service/government revenue (percent): 6.4 (2013), 5.9 (2014), 11.2 (2015), 9.9 (2016), 12.8 (2017), 16.2 (2018), 17.7 (2019)
Executive Board assessment — findings and policy recommendations
- Main findings:
- Declining hydrocarbon production and depressed oil prices have led to a deep economic contraction.
- Limited buffers heighten the need for sustained policy adjustment to restore fiscal sustainability.
- Achieving sustainable and inclusive growth requires significant efforts to diversify toward non‑resource sectors, enhance human capital, and improve the business climate.
- Policy recommendations:
- Increase the pace of fiscal consolidation beyond measures already underway.
- Mobilize non‑resource revenues and rationalize tax exemptions.
- Increase investment efficiency and prioritize ongoing projects while protecting social spending (health and education).
- Conduct a comprehensive tax policy review and develop debt management capacity with IMF technical assistance as needed.
- Develop a comprehensive reform agenda to improve the business climate, strengthen governance, foster human capital development, and reduce factor costs.
- Strengthen cooperation with the World Bank on business climate diagnostics to set structural reform priorities.
Financial sector and statistics
- Financial sector observations:
- Banks appear well capitalized, but high levels of non‑performing loans and declining profitability warrant vigilance.
- Financial sector vulnerabilities are linked to fiscal‑financial linkages: fiscal consolidation and government arrears to contractors affect firms’ ability to service loans.
- Directors encouraged adoption of a repayment strategy for accumulated arrears, maintenance of adequate capital buffers, strengthening bank supervision at the regional level, and promoting financial inclusion.
- Statistical developments:
- Commended steps: adoption of legislation and a development strategy for the national statistical system, rebasing of the national accounts, and application to join the enhanced General Data Dissemination Standard (e‑GDDS).
- Urged continued efforts, with IMF and partner assistance, to address remaining data gaps to support surveillance and policy formulation.
Selected economic and financial indicators (2013–21) — key series (exact values from source)
- Real GDP (annual percent change): -4.1 (2013), -0.5 (2014), -7.4 (2015), -9.9 (2016), -5.8 (2017), -2.7 (2018), -1.5 (2019), -1.2 (2020), 0.1 (2021)
- Hydrocarbon sectors (annual percent change): -6.9 (2013), 1.4 (2014), -8.9 (2015), -11.2 (2016), -7.8 (2017), -5.6 (2018), -4.3 (2019), -4.2 (2020)
- Oil and gas primary production (annual percent change): -12.1 (2013), 1.8 (2014), -8.1 (2015), -21.6 (2016), -11.5 (2017), -5.0 (2018), -3.0 (2019), -3.1 (2020), -1.8 (2021)
- Hydrocarbon secondary production1 (annual percent change): 5.4 (2013), 0.6 (2014), -10.6 (2015), 10.2 (2016), -2.4 (2017), -6.4 (2018), -6.1 (2019), -5.7 (2020), -4.0 (2021)
- Non‑hydrocarbon sectors (annual percent change): -3.3 (2013), -5.2 (2014), -8.0 (2015), 1.2 (2016), 2.0 (2017), 2.4 (2018), 3.2 (2019)
- Oil price (U.S. dollars a barrel)2: 100.3 (2013), 92.5 (2014), 47.0 (2015), 38.5 (2016), 45.7 (2017), 48.5 (2018), 50.7 (2019), 52.6 (2020), 54.2 (2021)
- Consumer prices (end of period): 4.9 (2013), 2.6 (2014), 1.6 (2015), 1.5 (2016), 1.9 (2017)
- Broad money (annual percent change): 7.3 (2013), -14.1 (2014), -10.9 (2015), -16.3 (2016), -0.4 (2017), 17.8 (2018), 19.3 (2019), 16.9 (2020)
- Nominal effective exchange rate (- = depreciation): -0.2 (2013), -9.1 (2014), n.a. (2015)
- Real effective exchange rate (- = depreciation): 4.2 (2013), 2.7 (2014)
Source: IMF Press Release No. 16/399, IMF Communications Department, September 8, 2016.