Authors : Domingos Mazivila, Dominique Puthod
The drop in oil prices since July 2014 has caused a recession. Oil and gas production fell by 10%, compared to 2014, to around 165 000 barrels a day in 2015. The non-oil economy, although in relative growth with respect to the rest of the economy, is nonetheless in decline. The recession, corresponding to a drop of 10.2% of GDP in 2015, is likely to continue until 2020 because of unfavourable forecasts for crude oil prices. While difficult to quantify, domestic government arrears and lower public investment tend to reduce fiscal space and constrict growth in the nonoil economy.
The importance of oil and gas (90% of GDP, 87% of fiscal revenues and 89% of exports) in the economy meant that the drop in oil prices had a spillover effect on public investment spending, which, at XAF 1 951 billion (CFA francs) in 2015, accounted for 86% of all public expenditure and is the engine of growth. The Amending Finance Law of May 2015 was based on an oil price of USD 40 per barrel, but further falls to close to USD 30 per barrel in January 2016 risk exacerbating budgetary pressures. Major steps have been announced for optimising revenues through fiscal reform and a reduction in tax exemptions. At the same time, spending is being reduced through controls on government operating costs. Moreover, the authorities have expressed their desire to return to balanced budgets in the coming years, in accordance with the second phase of the National Programme for Economic and Social Development (PNDES) 2013-17, which calls for less public investment.
The country’s proactive policy on urbanisation and housing improvement is ambitious. The new city of Djibloho, in the centre of mainland Equatorial Guinea, will be created under the framework of the policy of regrouping the populations of the main cities – Malabo, Bata, Mongomo, Ebebiyin, Evinayong and Luba. A complementary approach was taken in drafting the master plans for roads, housing and social infrastructure in order to improve the quality of urban life through economies of scale. Implementation of these plans will need to take account of the drop in oil revenues.
Africa: economic transformation hinges on unlocking potential of cities, says the African Economic Outlook 2016
AfricanEconomicOutlook.org offers comprehensive and comparable data and analysis of 54 African economies.