Running On Fumes
BMI View: The combination of stagnating oil production and faltering public investment spending has sent Equatorial Guinea's economy into a crisis, and we expect the country's GDP to contract by 1.9% in 2013 and 0.4% in 2014. The discovery of new oil fields could provide an upside risk to this forecast, but we doubt that an economic diversification drive of the sort underway in neighbouring Gabon is likely to succeed give n Equatorial Guinea's small population and appalling business environment.
Equatorial Guinea's economy expanded by a factor of 7.1 in US dollar terms between 2000 and 2012 as oil production turned the sleepy backwater into one of Africa's top energy exporters. With just 757,000 people, the country has become the richest per head in Africa. Billions of US dollars in oil revenue have entrenched President Teodoro Obiang Nguema Mbasogo and discouraged economic reforms.
Oil prod uction, however, peaked in 2005 and a sharp fall in energy prices in 2009 battered the economy. Government stimulus programs (which included building a new capital city in the middle of an inaccessible jungle) have had a limited effect. Unless oil production can be increased or new export industries developed, BMI predicts that Equatorial Guinea's economy faces a structural decline over the coming years.
|Africa - Real GDP Growth, %|