Equatorial Guinea’s economy experienced growth of 1.2% of gross domestic product (GDP) in 2010 as a result of the fall of oil output and the main oil-producing fields reaching their maturity. The economy has been on a downward trend since 2004, when real GDP growth peaked at 38%. The year 2010 experienced one of the lowest growth rates since oil exploitation of hydrocarbons began in the mid-1990s. It is expected to recover and return to high growth rates of 5.0% and 7.5% in 2011 and 2012. Despite lower outputs from the oil industry, growth will be sustained by the international demand for hydrocarbons and the construction of major infrastructure projects, including those for the hydrocarbon industry. 

The recovery of oil prices has had a positive effect on the government budget with the deficit reaching 2.6% of GDP in 2010, up from a deficit of 9.6% of GDP in 2009. Driven by falling imports, the current account rose to a surplus of 2.7% of GDP in 2010, compared to a 7.6% deficit in 2009; it is projected to remain in surplus of 2.9% in 2011 and further 3.8% in 2012. The inflation rate for 2010 was 4.7%. As a result of continued high levels of capital expenditure, inflation is expected to remain in the region of 6.3% in 2011. Equatorial Guinea faces no debt problems due to a budget surplus and external reserves. External debt at the end 2010 was close to 5% of GDP, or XAF 307 billion (CFA franc BEAC).

Equatorial Guinea lost its Extractive Industries Transparency Initiative (EITI) candidate status in 2010. The government stated its intention to improve the management of the oil sector and reapply for admission. Furthermore, the environment for private-sector activity remains difficult. Equatorial Guinea still ranks among the bottom countries in the World Bank’s Doing Business Index. It slipped three places in the ranking in 2011 to 164 from 161 in 2010. Key constraints include construction permits, import licences, the perceived high level of corruption, elaborate procedures and an unpredictable judicial environment.

Over 70% of the population in Equatorial Guinea falls below the poverty line, raising questions about the extent to which the country’s oil wealth has benefitted the majority of the population. Maternal and infant mortality rates are still very high. Measuring progress towards the Millennium Development Goals (MDGs) with precision is an extremely difficult task because of data deficits and an ongoing controversy about the population census. The country is on track to achieve the MDGs of universal primary education, reducing child mortality, improving maternal health, and combating HIV/AIDS, malaria and other diseases. However, it is not on track to achieve the MDGs of ensuring environmental sustainability and promoting gender equality and empowering women.

On the political front, 2010 has been the first year in office of the new cabinet under the same government, which has been in power since 1979. There have been few signs of political opening or change. Tensions have, nevertheless, remitted since the attack on the presidential palace in early 2009. In 2010, a group of four top military and government officials were sentenced to death for their role in these events. The government is trying to pursue an open-door policy to the rest of the world during 2010 with important investments in major events, including hosting the 2011 summit of the African Union and the 2012 Africa Cup of Nations. The plans for a UNESCO-Obiang Nguema Mbasogo award for scientific achievement were put on hold after intense criticism by the international community. The president´s eldest son and current Minister of Agriculture, Teodoro Nguema Obiang Mangue, has continued his ascension to power after being promoted to the rank of Lieutenant Colonel in the army and vice-president of the ruling party.

Oil wealth has attracted the attention of emerging economies in recent years. However, the country remains relatively closed. Equatorial Guinea’s main emerging partner is China. There is a small presence of Chinese Taipei, Cuba, Argentina, Brazil and Russia. The country’s hydrocarbons industry is still dominated by United States (US) companies but Chinese companies are increasingly active providing significant credit lines. Equatorial Guinea lacks the administrative capacity to engage strategically with the emerging partners.

Figures for 2010 are estimates; for 2011 and later are projections.

Source:National authorities’ data; estimates and projections based on authors’ calculations.

Table 2: GDP by sector (in percentage)

Source:Authors’ estimates based on local authorities data.

Figures for 2010 are estimates; for 2011 and later are projections.

The Equatorial Guinean economy grew by 1.2% of GDP in 2010, compared with 5.3% growth in 2009. The decline was due to acceleration in the fall of hydrocarbon output close to 10% during 2010, compared with a 6% fall in 2009. Oil production, which decreased by 25% as a result of the main production fields reaching maturity, was responsible for the reduction in hydrocarbon production, while the gas sector expanded by almost 35%. Real GDP is expected to grow by 5.0% in 2011 thanks to a recovery of oil prices and a continuing increase in gas production. In 2012, oil production is likely to increase again and GDP is expected to accelerate to 7.5%. Inflation, which has been high by Central African Franc (CFA) zone standards, was 4.7% in 2010, because of higher fuel prices, large public spending and strong private demand. It is forecast to reach 6.3% in 2011 as the economy recovers.

Equatorial Guinea is endowed with a tropical climate and fertile soils, forestry and marine resources. However, the contribution of these sectors to GDP is modest. Agriculture is dominated by subsistence farming. Agricultural products include coffee, cocoa, rice, yams, cassava (tapioca), bananas and palm oil nuts. Livestock and timber are also produced. Rural occupations face labour shortages as workers migrate to Bata on the mainland and Malabo on the island of Bioko. The country claims an exclusive maritime fishing zone of 300 000 square kilometres.

The year 2010 may mark a watershed for the Equatorial Guinean economy, as the government tries to adapt its fiscal policy to a less expansive stage of the oil industry, upon which economic growth has relied in the 2000s. Approximately 92% of fiscal revenues, 99% of exports and 71% of GDP are due to hydrocarbons. The government has continued to state its intention to re-invest some of the oil revenue in the agriculture and the fisheries sectors as part of its diversification strategy and to reduce the dependence on imported foodstuffs, but little progress was evident during 2010.

Outside the energy sector, the construction sector has been the main engine of growth, though its dynamism is likely to moderate in 2011 as public investment projects are cut back. The construction sector, which accounted for 7.4% of GDP in 2009, has been expanding rapidly in the 2000s as a result of the oil sector and large-scale public investment in infrastructure, notably the construction of roads, the rehabilitation of airports, the expansion of ports and the development of Malabo II.

According to government sources, 2010 marks the end of a phase in the development of Equatorial Guinea, in the sense that the emphasis on large infrastructure projects is coming to an end, and the government is turning towards other sectors for investment in the future. The upgrading of human capital is crucial to prioritise new sectors. Shortages of skilled labour in several key sectors such as health (e.g. hospitals), education (especially universities), construction and oil and gas (especially hydrocarbons) are readily apparent. Consumption increased by 7.5% in real terms in 2010, driven by an increase in public consumption of 11.6% compared with an increase of 6.1% in private consumption. Investment decreased by 2.7% in real terms in 2010, mainly as a result of the contraction of public investment.

An enduring controversy regarding population data remains an issue in Equatorial Guinea; population data affect the reliability of many economic and social statistics. There is a major discrepancy between government population statistics and those of development partners. Estimates from the United Nations Population Division put the population at 693 000 in 2010, a figure adopted by most international institutions, including the World Bank and the International Monetary Fund (IMF). However, the government claims that a 2002 census recorded a population of a little over 1 million. The government explains the discrepancy as largely due to the influx of migrants, drawn to Equatorial Guinea principally from neighbouring countries by the oil boom and the expectation of better jobs and prospects. A difference of such a large magnitude has an enormous impact on variables expressed as a percentage of population. This affects the measurement of economic and social progress and complicates making informed policy decisions. The government has declared its commitment to resolve the controversy regarding the population data with a new census and a household expenditure survey in 2011.

Table 3: Demand composition

Source: Data from national authorities, IMF and BEAC; estimates (e) and projections (p) based on authors’ calculations.

Figures for 2010 are estimates; for 2011 and later are projections.

Fiscal Policy

Economic policy in Equatorial Guinea is guided by the government’s medium-term strategy paper, the National Economic Development Plan: Horizon 2020, which seeks to reduce poverty and diversify the economy. The government embraced this ambitious plan to make Equatorial Guinea reach the status of an emerging economy by 2020. Although the objective is clearly defined, the real challenge has to do with the degree to which the strategy is implementable and actionable. Major structural deficiencies need to be addressed if the country is to consolidate its undeniable economic progress over the last decade and reach a path of sustainable growth.

The overall fiscal balance increased from a deficit of 9.6% of GDP in 2009 to 2.6% deficit in 2010, largely thanks to a recovery of hydrocarbon revenues and a significant reduction in government spending. The budget has grown substantially in the 2000s as royalties and taxes on oil and gas production have provided new resources. Balancing the budget has been a major challenge in 2010 and will remain so in 2011. If the budget follows the current trajectory the fiscal balance deficit could reach 2.8% of GDP in 2011 and 2.7% of GDP in 2012.

Hydrocarbons account for approximately 92% of government revenue, making government revenues volatile to both field production levels and shifts in international oil and gas market prices. In 2010, the value of oil exports increased from XAF 3 149.8 million (CFA Franc BEAC) to XAF 3916.4 million – a 24% increase – as a result of rising oil prices. Moreover, increased revenues from growing liquid gas production have partially compensated for the decline of oil production.

Value added and trade taxes are other revenue sources for the government. Total revenue and grants are projected at 47.1% of GDP in 2011, slightly down from 51.2% in 2010. A large proportion of non-oil revenues are derived from the returns on the country’s assets deposited at the regional central bank, the Banque des Etats de l’Afrique Centrale (BEAC), and in foreign banks. Non-oil revenue decreased from 3.8% of GDP in 2009 to 3.5% in 2010. Total government expenditure (including net lending) was 48.9% of GDP in 2010. It is projected to decrease to 48.3% of GDP in 2011 and 47.6% in 2012. Such high levels of fiscal spending that began in 2009 have been due to the government’s ambitious public investment programme. Despite intentions to rein in physical capital investment, particularly road-building and preparations for several international events due to be held in Equatorial Guinea during 2011-12, major projects will continue to constitute a significant drain on public finances. 

Since the mid-2000s, the government has been depositing some of its fiscal savings into a fund for future generations at the BEAC. External debt at the end of 2010 was 5% of GDP. A low debt ratio, large foreign reserves and forecast exports of over 80% of GDP suggest that debt sustainability is not likely to pose a major threat in the coming years. However, the country does still require technical assistance in managing its still large oil resources and the revenues they generate in order to optimise developmental outcomes.

Table 4: Public finances (percentage of GDP)

Source: Data from national authorities and BEAC; estimates (e) and projections (p) based on authors’ calculations.

Figures for 2010 are estimates; for 2011 and later are projections.

Figure 2: Stock of total external debt (percentage of GDP) and debt service (percentage of exports of goods and services)

Equatorial Guinea remains a relatively closed country; its main emerging partner is China. While there are minor presences of a few firms from a handful of countries, these are mainly project based with the focus on construction. There is a small presence of Chinese Taipei, Cuba, Argentina and Russia. The composition of emerging partners present in Equatorial Guinea corresponds to the map of diplomatic representations in the country. Equatorial Guinea has diplomatic representations in Argentina, Brazil, Russia and, as of 2010, Venezuela. The network of embassies in traditional partner countries includes Spain, the United States, France and the United Kingdom. There are foreign representations in Malabo of China, Cuba, Spain, France, Morocco and South Africa.

The country’s oil wealth has attracted the attention of emerging economies in recent years. Although US companies still dominate the country’s hydrocarbons industry, Chinese companies are increasingly active providing significant credit lines. So far, Chinese companies are increasing their influence but obtaining little return in terms of oil.

Chinese engagement is characterised by commitments to deliver projects “key in hand” and are further notable in that projects are normally completed faster than those undertaken by traditional partners. Hence, China is perceived as a more reliable partner, although it tends to import all construction materials, technical staff and workers rendering short-term economic gain negligible. It is mainly engaging in the areas of public works and infrastructure – projects undertaken for long-term economic benefits. In the 2000s, China has built hospitals, a sports stadium, port expansions, as well as the new ministries and other government buildings in Malabo II. China is not only present in big infrastructure works. Chinese entrepreneurs are gradually increasing their presence in retail business operations and import/export activities. They are also developing the market for their accessible consumer products, including furniture and spare parts. China has a long history in Equatorial Guinea. The Chinese company Sinohydro, which has important operations in other parts of Africa, is responsible for one of the largest civil engineering projects in the country: the construction of the Djibloho hydroelectric power plant, which is to be completed in 2011. A Chinese company is also building the conference hall for the 2011 summit of the African Union.

At the bilateral level, the IMF documents two examples of China-Equatorial Guinea loans on a concessional and a non-concessional basis. China extended a USD 2 billion non-concessional credit line to Equatorial Guinea in 2006. The loans were earmarked for infrastructure (four projects in electrification and improvements to Bata harbour). The terms of the loan consisted of an interest rate of 5.5%, five years maturity with a two-year grace period and a repayment guarantee in the form of liquid deposits at the Eximbank of China equivalent to 30% of the outstanding stock of debt was required. According to the IMF, the Chinese government is reported to have extended an offer for a USD 380 million long-term concessional loan for housing construction (17 years maturity, a 2-year grace period and a 2% interest rate).

While the government welcomes the ease of doing business with the Chinese, some civil servants are becoming increasingly concerned with two issues. First, the limited spin-off and/or multiplier effects of Chinese projects on the national demand for goods and services. Second, the quality of some of the projects executed could have been much higher. The latter issue is being addressed with trilateral co-operation approaches in which a company from a traditional partner takes care of the quality control. For example, a Chinese firm is installing a completely new sewerage system in the capital, while a Spanish engineering company is testing the infrastructure against international safety and quality standards.

Other emerging partners are slowly gaining importance, but remain far behind China. In 2010, Gazprom Neft, the oil arm of the Russian gas giant Gazprom, signed a production sharing agreement for two offshore oil blocks in Equatorial Guinea totalling an investment of USD 3 billion over the next 30 years. In 2008, the government awarded a second mobile telephone licence to Hist Telecom of Saudi Arabia. There has been some interest from Turkey and Argentina to sign agreements to foster trade exchanges and increase the security of investments. However, the volume of trade flows between Equatorial Guinea and Turkey reached a meagre USD 20 million during 2010 and the trade exchanges with Argentina are almost negligible. Cuba has traditionally dispatched teams of doctors for training and assistance. The Israeli firm International Medical Service (IMS) is building a 120-bed hospital outside Malabo.

Emerging partners from Africa include Morocco, Egypt and Libya. There has been a Moroccan presence since 2007 with the arrival of Maroc Telecom and the civil engineering company, Somagec, which built the airport and port facility in Annobon in 2010. The Egyptian company, Arab Contractors, is responsible for the building of the motorway and the promenade between Malabo and Sipopo. The Libyan  firm, Seguibatand, won the contract to build the villas where the heads of state will be hosted during the summit of the African Union.

President Teodoro Obiang Nguema Mbasogo maintains very close relations with some traditional partners, especially France. The French Group Bouygues, with close connections to the entourage of the president, remains the lead construction firm active in Equatorial Guinea. It was commissioned to build the luxury hotel and accompanying 18-hole golf course for the African Union Summit, which is to be delivered in March 2011. The presence of Spanish firms is particularly evident in the food and distribution sectors; however, the inputs for these activities come from imports rather than local suppliers.

Equatorial Guinea lacks the administrative capacity to engage strategically with its emerging partners. In other words, it does not negotiate terms that provide economic stimulus – using local materials and workers for example. Furthermore, the government does not have a plan to prioritise its engagement strategy with emerging partners through assessing their relative benefits for things like job or market creation. Equatorial Guinea would benefit from peer learning and exchanging best practices at the regional and African level; both of these need to be promoted to reap the greatest benefits from traditional and emerging development partners. The capacity of civil servants dealing with emerging partners still needs improvement. Although it is relatively common for civil servants at director-general level to be able to express themselves correctly in Chinese and carry out their negotiations in Chinese, the capacity of civil servants in all of their interactions and negotiations with all emerging partners needs improvement. Without the incentives or knowledge to enhance capacity and to engage strategically with emerging partners, Equatorial Guinea will continue to miss development opportunities.

Equatorial Guinea formally has a multiparty system of government with an executive president and a single-chamber legislature. Presidential elections are held every seven years and parliamentary elections every five years. President Teodoro Obiang Nguema Mbasogo has been in power since 1979 and is the second longest serving African president after President Muammar Gaddafi. In the latest presidential elections in November 2009 he won 99 seats in the 100-seat parliament with 96.7% of the votes. The ruling Partido Democrático de Guinea Ecuatorial (PDGE) also has an overwhelming majority in all 30 municipalities. The results were disputed by the opposition, which won the one remaining seat in parliament. The conditions imposed by the government on international observers were severely criticised for not permitting them to carry out an independent monitoring function. The next parliamentary elections are due to be held in 2014.

In January 2010, President Obiang Nguema Mbasogo named a new cabinet, fulfilling a constitutional requirement to form a new government after a presidential election. The new cabinet, comprising 26 ministers, was 50% larger in size than the previous cabinet. Over the course of 2010 the new government has shown few signs of political opening or weakness. Tensions have nevertheless declined somewhat since the attack on the presidential palace in early 2009. In 2010, four top officials were sentenced to death for their role in these events while several Nigerians were sentenced to long prison sentences. The death sentences were carried out shortly after they were announced by the military tribunal.

According to the BBC, the government closely controls Equatorial Guinea’s media outlets and there are few private publications. The country went down in its ranking to 167 out of 178 countries in the 2010 Reporters Without Borders’ Press Freedom Index (it ranked 158 out of 175 countries in 2009).

In June 2010, the president announced a series of reforms targeting the culture of corruption and mismanagement. Partial evidence of a minor shift in the government’s tolerance of widespread corruption can be detected in a court case in December 2010 of several high-level civil servants accused of embezzlement. Whether this marks a true departure from past practice, or is purely symbolic, remains to be seen in the coming years.

In the absence of a truly participative democratic system, concerns are already being voiced about the future stability of the current regime. The president is now 68 years old and the rumours about his health are intensifying. He has made it known he favours his eldest son, Teodoro Nguema Obiang Mangue, as his successor for eventually taking over power. “Little Teodoro”, as he is known in Equatorial Guinea, is the current Minister of Agriculture and Forestry. In July 2010, he was designated vice-president of the ruling PDGE and vice-president of theJuventudes del Partido Democrático de Guinea Ecuatorial. In October 2010, he was promoted to the rank of Lieutenant Colonel in the armed forces.

The government is trying to improve perceptions of legitimacy by pursuing a more open-door policy to the rest of the world. For example, in 2008, President Obiang Nguema Mbasogo donated USD 3 million for the United Nations Educational, Scientific and Cultural Organization (UNESCO) to sponsor an annual Unesco-Obiang Nguema Mbasogo international prize for research in the life sciences. In June 2010, however, UNESCO postponed the plans after heavy criticism by the international community. The UNESCO executive board stayed the decision to suspend the award in October 2010 until consensus by all member countries can be reached.

Equatorial Guinea recorded one of the highest levels of GDP per capita in Africa; estimates vary greatly depending on the population figures used in the calculation. The World Bank states the 2009 GDP per capita as USD 15 397 (current US dollars). When calculated on the basis of purchasing power parity with the same 690 000 population, the GDP per capita is close to USD 20 000. The country has attained this status in the wake of the oil boom. UNESCO estimated Equatorial Guinea’s adult literacy rate at 93% in 2008, up from 87% in 2000; this is much higher than the average of 62.1% for sub-Saharan Africa.

Equatorial Guinea no longer receives large inflows of foreign aid. The World Bank, for instance, does not have a permanent representation in the country. Spain continues to be the major international donor, with funding of approximately EUR 12 million per year. Other donors, such as France, provide limited financial support, though their political influence is far more notable. The strategy of the African Development Bank (AfDB) in Equatorial Guinea is based on a government-Bank joint project financing mechanism with a minimum 50% of the project cost borne by the state. The strategy supports the building of national capacities with a view to economic diversification. The AfDB is currently funding a number of major projects with four outstanding loans. The most important of these is a EUR 38.9 million loan in support of the education sector for training middle-ranking and senior managerial staff and for developing technical capacity in the diversification sectors through technical and vocational training.

Equatorial Guinea ranked 117 out of 169 countries with comparable data on the 2010 United Nations Development Programme Human Development Index (HDI). The HDI is a composite index encompassing several variables related to three dimensions, including standard of living, life expectancy and knowledge and education. The HDI of sub-Saharan Africa as a region increased from 0.293 in 1980 to 0.389 in 2010, placing Equatorial Guinea above the regional average with 0.538 in 2010. The country’s human development indicators are relatively strong. However, the country’s relatively good ranking in the top tier of African countries is due, to a large extent, to the high level of per capita income. The most recent Household Expenditure Survey dating from 2006 showed that over 70% of the population fell below the poverty line. The planned 2011 census should be complemented by a household expenditure survey with better estimates, but the incidence of poverty is not expected to differ much from this figure. Such a high incidence of poverty, in a country with per capita income higher than some EU member countries, reflects a high degree of income inequality, which is not considered in the Human Development Index. A key concern, therefore, is to the extent to which the population benefits from the gains of the oil sector. A more equitable distribution of these gains should be a priority.

It is widely acknowledged that social-sector improvements have lagged far behind developments in the oil and construction sectors. The government is reportedly spending approximately 10% of the budget on health. Nevertheless, overall, social-sector expenditures are still under-financed, contributing only 14% of total government expenditures. It would be possible to raise this to reach 20% of the budget to finance expenditures on primary education and health, in line with the 1995 Copenhagen Social Summit 2020 initiative. Additional expenditures to finance necessary investments in secondary and tertiary social needs (e.g. university education), in line with the priorities to boost human capital and training, would also be possible.

Health and sanitation indicators are improving from a very low base but measuring with precision the progress towards the MDGs is a challenging task because of data deficits and the controversy about the population census. The country seems on track to achieve the MDGs of universal primary education, reducing child mortality, improving maternal health, and combating HIV/AIDS, malaria and other diseases. However, Equatorial Guinea is not on course to achieve the MDGs of ensuring environmental sustainability and promoting gender equality and empowering women. There is insufficient information on tracking the MDGs for developing a global partnership for development and eradicating extreme poverty and hunger.

The infant mortality rate (the probability of a child born in a specific year dying before reaching the age of one) was 90 per 1 000 in 2008, much lower than the figure of 120 per 1 000 in 1990, but still among the highest rates in the world. Similarly, the under-5 mortality rate decreased from 198 per 1 000 in 1990 to 147 in 2008. The decrease in these mortality rates has been achieved despite the reduced coverage of immunisation of children against measles, a leading cause of death among children. The immunisation rate for measles dropped from 88% in 1990 to 51% in 2009 but these figures are likely to be affected by population estimates. The maternal mortality rate was 1 000 per 100 000 in 1990 and it has come down to 280 in 2008, still remarkably high but improving.

The incidence of tuberculosis has increased to 117 per 1 000 000 in 2009; while the incidence of HIV/AIDS has increased from 1% in 1990 to close to 5% in 2008. Reliable HIV and blood-testing facilities in the country remain one of the most important challenges for the health system. According to UNAIDS, the use of antiretroviral treatments is increasing thanks to international finance. The proportion of the population with access to improved sanitation has languished at 51% since 1990 both in rural and urban areas and the proportion with access to improved water sources has also stagnated at 43%. During 2010, the oil company Marathon continued to finance a malaria-fighting scheme that has contributed to a 70% to 80% reduction in mortality rates since 2003. Infrastructure projects that are about to be completed, such as the provision of sanitation in Malabo, should have a positive impact on the incidence of diseases such as typhoid fever and malaria. Indicators suggest that some education elements also appear to have improved over recent years. Notably, total primary school enrolment increased from 69% in 2002 to 89.5% in 2008. UNESCO estimates there are 28 pupils per teacher in primary education in 200. The anecdotal evidence gathered suggests that this might be an overestimation.

The country attracts a large number of immigrants from other African countries. Most of them come from neighbouring countries but recent years have witnessed the creation of important communities of immigrants from the east of Africa, mostly Ethiopia. The presence of workers from the Philippines, the United States and the United Kingdom is important in the oil sector. Given the small population of Equatorial Guinea and the low human resource capital base, the government is currently reviewing immigration laws with a view to attracting skilled foreign labour and discouraging unskilled labour. Urbanisation has been proceeding at a high rate, because of the oil boom and the relative neglect of rural economic activity.