Economic studies
Gabon

Gabon

Population 2.1 million
GDP per capita 8,220 US$
C
Country risk assessment
D
Business Climate
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Synthesis

major macro economic indicators

  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 0.5 0.8 2.8 1.0
Inflation (yearly average, %) 2.7 4.8 2.3 1.0
Budget balance (% GDP) -2.6 -1.2 1.0 0.8
Current account balance (% GDP) -4.5 -2.4 2.1 0.8
Public debt (% GDP) 62.6 60.6 56.4 53.9

 

(e): Estimate. (f): Forecast.

STRENGTHS

  • 5th largest oil producer in sub-Saharan Africa; Africa’s 2nd largest producer of wood; world's leading producer of manganese, a highly sought-after commodity
  • Drive to diversify the economy undertaken as part of the Emerging Gabon Strategic Plan
  • Member of the CEMAC

WEAKNESSES

  • Economy heavily dependent on the oil sector
  • High cost of production factors, linked to inadequate infrastructure (transport and electricity)
  • High unemployment and endemic poverty
  • Difficult political and social context, pervasive corruption
  • Stock of domestic and external arrears not yet cleared

Risk assessment

A recovery constrained by domestic demand

After benefiting from the rebound in oil production in 2019 (after several years of decline), activity is expected to accelerate at a more measured pace in 2020. Private investment, which has been weak since 2014, is expected to be a major contributor to growth, helped by the government’s efforts to increase the attractiveness of the oil sector and in particular by changes to the hydrocarbon law in July 2019. Outside the oil sector, private investment should also continue to grow briskly in the mining (manganese), agri-food (palm oil, rubber) and forestry sectors, although the latter may be affected after its reputation was dented by a corruption scandal. However, while previous investments in these sectors should support exports, the contribution of the trade balance will remain constrained by less favourable oil prices, despite a potential increase in export volumes of oil (which represents about 70% of export earnings). In addition, the restrictive fiscal environment will depress the contributions from public consumption and investment. Meanwhile, the State’s major role as an employer means that budgetary constraints are also likely to be reflected in private consumption.

 

Despite the current account surplus, the external situation remains vulnerable

In 2020, the budget balance is expected to remain positive, while deteriorating slightly. Oil revenues, which make up about 40% of the State's revenues, are set to be affected by lower production gains and less favourable oil prices. Non-oil revenues are expected to continue to increase because of efforts to optimise tax resource mobilisation, notably under the Extended Fund Facility (EFF) program being carried out with the IMF. Fiscal consolidation efforts should also be pursued on the expenditure side, with a focus on containing the State's large wage bill, which absorbs nearly 60% of revenues. Capital investment spending may increase to revive infrastructure projects. Among other things, the savings generated should be put towards clearing domestic and external arrears, and bringing down the debt ratio. However, the large shares of external debt (70% of the total) and foreign currency debt (about 60% of the total) remain sources of vulnerability that could increase the cost of debt service.

In 2020, the current account surplus is expected to decline. In particular, the trade surplus is expected to be lower due to the trend in oil exports. The service account is expected to continue to show a significant deficit, as is the income account, owing to the repatriation of profits by foreign companies. Remittances from foreign workers living in Gabon are expected to maintain the slight deficit in the transfer account. IMF disbursements under the EFF programme (due to end in June 2020) and FDI should support the CEMAC's overall external position and contribute to the replenishment of common foreign exchange reserves. Nevertheless, the country will remain exposed, particularly in the event of a new shock to oil prices, to the liquidity shortages that have regularly affected the Central African monetary zone in recent years.

 

Relative and fragile political stability

The political situation has remained volatile since the tumultuous re-election in 2016 of President Ali Bongo Ondimba, who has been in office since 2009 after succeeding his father. Admittedly, the divided state of the opposition and the isolation of the President’s main opponent, Jean Ping, who continues to claim to be President-elect, have helped to ease the tensions, which were running high after the election. In addition, the national dialogue held in 2017 resulted in a constitutional review in January 2018 that appeared to strengthen the executive. President Bongo also emerged stronger from the October 2018 parliamentary elections, which gave his Gabonese Democratic Party (PDG) an absolute majority in the face of an opposition that was divided and weakened by Mr Ping's call for a boycott. Nevertheless, questions about the President's state of health following his hospitalisation in Saudi Arabia in October 2018, and his five-month convalescence, have led to challenges to President Bongo's authority, including a swiftly aborted coup attempt in January 2019. While these uncertainties have receded since the President returned to the country in March 2019, pending the next elections in 2023, new health problems for the President may be compounded by public dissatisfaction with widespread unemployment and low living standards. Regular civil service strikes attest to the tense social situation. These demonstrations could cause the authorities to deviate from their budgetary commitments, which would undermine the perception of governance. This situation, combined with deficient infrastructure, the non-transparency and unavailability of trade information and complex administrative procedures, makes for a difficult business climate, with Gabon coming 169th out of 190 countries in the Doing Business 2020 ranking.

 

 

Last update: February 2020

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