Basic macroeconomic indicators for the last 5 years (nominal GDP/cap., development of GDP volume, inflation rate, unemployment rate). Expected development in the territory with an emphasis on the economic sphere.
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| nominal GDP (billion USD) | 38,8 | 35,25 | 31,77 | 12,5 | 13,2 |
| real GDP growth (%) | -0,5 | -7,4 | -9,9 | -3,2 | -7,7 |
| population (millions) | 0,8 | 0,8 | 0,8 | 0,8 | 1,3 |
| GDP/capita (USD in PPP) | 48 900 | 44 100 | 38 700 | 37 400 | 15 294 |
| inflation | na | 11,7 | 3,1 | 0,7 | 0,9 |
Source: EIU
Equatorial Guinea recognizes the need to diversify the economy, without which further economic growth will not be possible. It started working with the World Bank (SB) and the International Monetary Fund (IMF), with which it signed an agreement and whose representative office was recently opened in Malabo. In order to attract more foreign investors, Equatorial Guinea is holding a National Economic Conference in March 2019, which aims to update the national economic plan “Horizon 2020”. Check ebizdir for economical facts of Equatorial Guinea.
Despite rising oil prices, real GDP contracted by 7.9% in 2018, reflecting the continuation of the economic recession triggered by the rapid decline in global oil prices in 2014 and strongly supported by weak economic diversification. The main factor in the decline was the decrease in revenues from operating oil wells, which reduced oil production by 14%. The country is still heavily dependent on hydrocarbons, which accounted for 56% of GDP, 95% of exports and 80% of fiscal revenue in 2017.
The budget deficit decreased to 0.9% of GDP in 2018 from 2.9% in 2017 and 8.6% in 2016 thanks to significantly lower government spending (capital and operating expenses) combined with an improvement in the collection process of revenues to the treasury. Inflation was moderate in 2018 and was estimated at 0.6%, down from 0.7% in 2017. This was achieved thanks to common policies in the Central African Economic and Monetary Community (Communauté économique et monétaire de l’Afrique centrale – CEMAC) and lower prices of food and soft drinks.
CEMAC’s strategy to reduce fiscal and external imbalances caused by lower oil prices should continue to have a positive impact on Equatorial Guinea. After reducing the fiscal deficit to a projected 0.5% of GDP in 2019, the budget balance is projected to turn into a surplus of 0.3% in 2020. Inflation is expected to reach 1.4% in 2019 and 1.9% in 2020, which is less than the 3% limit set by CEMAC.
Real GDP should further decline by 2.7% in 2019 and by 2.5% in 2020 due to lower hydrocarbon production and fiscal adjustments. The government is counting on further foreign direct investment in the oil sector to support further production in the medium term.
According to the IMF, continued macroeconomic consolidation, especially with regard to external accounts, will require deepening government efforts in the following areas: human resource and capacity development, especially in public policy planning and implementation; transforming agriculture to diversify the domestic economy; ensuring efficient use of the improved infrastructure the country has acquired in recent years and revitalizing the hydrocarbons sector – the driving force of the economy – to fully exploit the potential of rising oil prices.
Similar to other CEMAC countries, Equatorial Guinea also faces serious challenges, which include: small financial reserves, low economic activity and insufficient protection of the most vulnerable population groups. It is just another argument for Equatorial Guinea, in coordination with other CEMAC countries, to continue the ongoing fiscal consolidation. The country should protect its priority spending and continue reforms aimed at improving the business environment and governance to stimulate growth and diversify the economy. It cannot be forgotten that the main growth catalyst remains the private sector.
A change in the approach of the government and state administration is a challenge in itself. Current shortcomings include: limited access to information; procedural deficiencies in public financial management in planning, implementation, oversight, transparency and accountability; and insufficient institutional resources and systems, especially the lack of qualified personnel to ensure proper day-to-day administrative management and implementation of reforms.
Over the past two decades, Equatorial Guinea has used oil revenues to invest heavily in infrastructure (eg transport and energy) and to maintain an upward development trajectory.
In line with CEMAC’s efforts, state authorities now appear poised to introduce further reforms to promote growth and economic diversification. In 2019, they will revise the National Economic and Social Development Plan to stimulate the growth of non-oil sectors. The aim of the updated plan is to diversify the economy and improve the business environment.
Public finances, state budget – income, expenditure, balance for the last 5 years
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| revenues | 34,3 | na | 2 436 mld USD | 2 114 | na |
| expenses | 43,2 | na | 2 862 mld USD | 2 523 | na |
| balance % HDP | -7,2 | -4,8 | -3,7 | -3,3 | na |
source: EIU
The budget deficit decreased to 0.9% of GDP in 2018 from 2.9% in 2017 and 8.6% in 2016 thanks to significantly lower government spending (capital and operating expenses) combined with an improvement in the collection process of revenues to the treasury. Inflation was moderate in 2018 and was estimated at 0.6%, down from 0.7% in 2017. This was achieved thanks to common policies in the Central African Economic and Monetary Community (Communauté économique et monétaire de l’Afrique centrale – CEMAC) and lower prices of food and soft drinks.
CEMAC’s strategy to reduce fiscal and external imbalances caused by lower oil prices should continue to have a positive impact on Equatorial Guinea. After reducing the fiscal deficit to a projected 0.5% of GDP in 2019, the budget balance is projected to turn into a surplus of 0.3% in 2020. Inflation is expected to reach 1.4% in 2019 and 1.9% in 2020, which is less than the 3% limit set by CEMAC.
Balance of payments (current, capital, financial account), foreign exchange reserves (last 5 years), public debt to GDP, foreign debt, debt service
| v mil. USD | 2014 | 2015 | 2016 | 2017 | 2018 |
| current account balance | -2 050 | -2 322 | -1 368 | -738 | na |
| including reserves | 2 754 | 1 205 | 621,9 | 45,5 | na |
| foreign debt | 1 386,3 | 1 194 | 1 364 | 1 211 | na |
| debt. service | 289,3 | na | na | na | na |
| public debt % of GDP | na | 16,4 | 24,3 | 37,4 | 37,3 |
source: EIU, CIA
Banking system (major banks and insurance companies)
The monetary policy of Equatorial Guinea is determined by the common central bank of the Central African countries – Banque des Etats de l´Afrique Centrale (BEAC) based in Yaoundé (www.beac.int). It oversees the activities of banks in the other five member countries of the Central African Integration Group (Chad, Congo, Gabon, Cameroon and the Central African Republic). The BEAC Central Bank issues currency and oversees liquidity within the Central African Monetary Zone through rediscount rates and control of member money markets. In its monetary policy, it basically copies the decisions of the European Central Bank.
In 1993, the BEAC member countries also created a transnational institution of banking supervision – COBAC (Commission Bancaire de l’Afrique Centrale), which has special powers to regulate the activity and observe discipline at all banking institutions of the CEMAC integration group. Like all other signatories to the CFA Franc Zone in Africa (1948), Equatorial Guinea is also required to hold at least 60% of its foreign reserves in a “compte d’operation” account managed in Paris.
Five commercial banks operate in Equatorial Guinea:
- BGFI Bank GE (Gabon)
- Common Savings and Investment Fund CCEI Bank GE (Kamerun)
- National Bank of Equatorial Guinea
- Ecobank (opened its first branch in Malabo in January 2013)
- Société Génerale (in 2013 sold 52.24% of the shares of the subsidiary SGGE, there is speculation about the buyer – there is talk of the Moroccan bank Attijariwafa Bank)
Tax system
The tax system of Equatorial Guinea does not discriminate against the business interests of foreign entities that dominate the Guinean economy. A legal entity or a natural person conducting operations in Equatorial Guinea is considered resident for tax purposes if they operate in the country for more than 3 months of the year. The Guinean tax system is slowly adapting to the uniform system within the CEMAC countries, but due to frequent changes (especially regarding exemptions) it is still very confusing. It consists of the following basic direct and indirect taxes and employee social insurance:
- Personal Income Tax (Personal Income Tax) – is progressive according to income in the range 0-35%,
- Corporate tax – 35% of net profit, 3% of annual turnover (minimum 800000 CFA, even if the company does not generate profit) is always paid in advance on 31/03 of the given year, but is deductible from the following year’s corporate tax
- Value added tax (VAT): the basic rate on most goods is 15%. Basic necessities, medicines, glasses, hospital equipment, fertilizers and pesticides have a zero rate, some commodities a 6% rate, luxury goods (alcohol, tobacco…) a 30% rate. The importer pays VAT before picking up the goods from the customs warehouse.
Social insurance amounts to 22.5% of the salary, the employee contributes 5%.
Business is burdened by a number of other payments and levies.
Tax and other reliefs can be individually negotiated by companies producing for export, creating jobs for the local workforce, training local workers, investing in social services or in areas that are considered underdeveloped. Relief can be obtained by a business in the interior of the mainland, other exemptions can also be obtained by agricultural cooperatives, supply cooperatives, credit unions and public benefit companies. Companies doing business in free zones or the free port in Luba do not pay customs duties, personal income tax, corporate tax or VAT. Small and medium-sized businesses are governed by Law 16/1995, which grants additional benefits to businesses managed by an Equatorial Guinean citizen with more than 51% of local capital.
However, the government unexpectedly canceled all previously granted exemptions with its Regulation No. 72/2014 of May 21, 2014, stating that each company must renegotiate them. If she fails to do so, she must pay all applicable taxes and duties. Exemptions from paying VAT and personal income tax have been completely abolished.
