The country’s main economic and social indicators improved in 2010, with restored overall growth (5.5%) and a healthier budget situation. The current account surplus grew despite inflation above the target level.

These advances were due to higher investments for the construction of facilities for the Africa Cup of Nations football tournament (Coupe d’Afrique des Nations – CAN 2012) and infrastructure projects for the 50th anniversary of independence celebrations, and to improved international circumstances bringing about better prices for Gabon’s raw material exports.

Table 2: GDP by sector (in percentage)

Source:AfDB Statistics Department; national authorities (DGE).

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

Growth remains strong as in the previous five years. GDP grew by 8.8% in 2010 compared with the growth attained in 2009, which was 9.9%. This is projected to reach 10% in 2011. Growth is mainly driven by the service sector (14.5%), followed by the industrial (10.2%) and agricultural (6%) sectors. Within the agricultural sector, the fishing sub-sector rebounded in 2010 while the other sectors remained fundamentally unchanged. The service sector’s leading role was primarily driven by high growth in hotels and restaurants, financial intermediation, public services and real estate.

In terms of the structure of GDP, last year’s dominant role of the service and the agricultural sector largely remained unchanged. Thus, in 2009 the most dominant sector of the economy in terms of its share remained the service sector at about 43.9% of GDP. This is followed by the agricultural sector with a 43.2% share in GDP. The industrial sector’s share remained largely unchanged from last year with its share of GDP at about 13.0%. The manufacturing sector, within the industrial sector, also remained feeble in 2009, at 4.9% of GDP (Table 2).

As regards prospects for 2011 and 2012, it is likely that this excellent growth will continue based on the government’s recent forecasts. In 2010 the government launched a new five-year plan – the Growth and Transformation Plan 2010/11-2014/15. This plan, beginning in fiscal year 2010/11, envisions the agricultural sector to be the major source of economic growth. Industrial growth is also a particular focus and the government plans to promote the sector using both export-oriented and import-substituting industrialisation policy. The industrial sector is thus expected to grow at a faster rate than other sectors. In agriculture, the plan calls for a shift to high-value crops, a focus on high-potential areas, the commercialisation of smallholder farming, and the development of large-scale, commercial agriculture. Expanding infrastructure, such as roads, and power and water supply, is also expected to support the realisation of this strategy. In the base case scenario, Ethiopia’s economy is projected to grow at an average annual rate of 11.2% from 2011 to 2015. In this scenario, agriculture on average will be growing at 8.1% per annum. Industry and services are expected to show an average annual growth of 20% and 11%, respectively. In the best case scenario the government envisages 15% growth in GDP with agriculture also growing at 15%, nearly doubling the base case scenario of 8.1%, while the other sectors’ growth reaches the base case level.

Except for the last three years when inflation and foreign exchange became major problems, the macroeconomic performance has been very good. But the growth projections for the agricultural sector are based on unprecedented expectations given the traditional dependence on rain-fed agriculture. The sustainability of this growth is also questionable when one takes into accounta low level of domestic resource mobilisation and the shortage of foreign exchange.

There is a need to focus on bringing about major structural change in the economy to ensure the sustainability of economic growth. The country has experienced significant growth in the last five years. However, when judged in the context of the structural problems confronted in the period under analysis, its sustainability is an issue. Growth is accompanied by a marked absence of structural transformation. Moreover, the sources of GDP growth were an intensive use of resources, especially labour and land, and the outcome still depended on good weather. Productivity growth played little part. This should not come as a surprise, however, given an economy that is operating with backward technology, rain-dependent agriculture, and vulnerable to external shocks. Economic growth, especially in urban areas, is also accompanied by rising inequality with detrimental impact on poverty reduction. Thus, if the country manages to attain even the base case scenario envisaged in the new five-year plan for the years 2011 and 2012, it would be a great achievement.

Domestic demand is still dominated by consumption. Compared to 2009, consumption marginally increased in 2010, by 7.8%. Private consumption is the main contributor to this growth in consumption. Gross capital formation has also increased by 11.5% in 2010 and is projected to grow by 13.3% in 2011. Both public and private capital formation contributed to this trend but the public sector’s contribution was nearly double that of the private sector. In the external sector, imports have shown an increase of 5.7% in 2010 and are projected to decline by 3.4% in 2011. Exports grew by 1.3% in 2010 and are expected to increase further, by 14.8%, in 2011. The negative trade balance remained substantial in 2010, though projected to improve in 2011. Exports and investment are projected to grow to over 30% of GDP during the 2011-15 five-year plan but these figures seem ambitious – the current GDP level of exports and investment do not warrant such expectations. A more realistic level of export growth, combined with the plan’s projected growth of imports (to over 45% of GDP), are likely to strain the balance of payments in the years 2011 and 2012. (Table 3).

Table 3: Demand composition

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

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

The 2010 budget, largely based on domestic funding, focused on infrastructure projects (two-thirds of government investment), including repairing roads and building new ones. This policy, backed by Gabon’s emerging-country partners, eased budgetary tensions, boosted GDP growth and improved the external balance.

The search for emerging partners should strengthen macroeconomic policy in 2011 and 2012 and perhaps curb inflation better and make debt more sustainable.

Fiscal Policy

Repayments on the government’s external debt are set to increase because of higher interest, while internal-debt servicing will decrease by a greater amount because of lower payments of both interest and the principal, resulting in a slight drop in overall debt service in 2010, to 1.8% of exports (from 1.9% in 2009), with a further fall in 2011 (to 1.6%) and 2012 (1.4%).

Budget policy since 2009 has aimed at limiting the primary non-oil deficit to 9.5% of non-oil GDP, but this target was greatly exceeded (rising to 14%) because big wage increases for health and education workers pushed it up to XAF 379.7 billion (CFA francs BEAC), XAF 43.7 billion more than the budgeted XAF 336 billion.

The 2010 budget policy, which continued to focus on diversifying the economy, reduced government spending to 21.1% of GDP (from 24.8% in 2009), and this should keep falling in 2011 (to 20.0%) and 2012 (to 19.6%) with less recurrent expenditure – wages and salaries were 6.2% of nominal GDP in 2010 (7.2% in 2009), after a survey found non-existent government employees and enabled various administrative irregularities to be corrected.

Government revenue fell slightly to 24.8% of nominal GDP (25.0% in 2009) owing to reduction of the tax burden to 12.9% (from 14.3% in 2009) which should continue to fall slightly in 2011 and 2012. Oil revenue rose to 10.7% of GDP (9.5% in 2009) and should slightly increase due to higher production and the higher average price of Brent crude. This boosted the overall surplus to 3.7% of GDP (up from 0.2% in 2009), which is expected to rise to 4% in 2011 and 4.6% in 2012.

The policy of curbing government spending and increasing revenue, begun in 2009, continued in 2010 with modernisation of public-finance management by centralising (by computer) all goods and services supply bids under current purchases (spending not subject to public procurement laws), meaning that the government cannot buy items from a supplier not registered as government suppliers in its Fichier des fournisseurs de l’Etat (2FE).

Steps have been taken since January 2011 to increase wage earners’ buying power through lower taxes and a simpler tax system. Value added tax on a bag of cement and on metered water and electricity bills was cut from 18% to 5% and on bills from classic meters to 10%. The special tax per cubic metre of water was cut by 15% and on each kW/hour of electricity by 2.5%. The price of butane gas was brought down to XAF 5 450 from 6 000 per 12.5 kg bottle, and the electricity-metre rental charge was reduced.

The government issued bond loans in 2010 to help ease the public debt and this raised XAF 445 billion, according to the general directorate of the economy. Budget liquidity, which averaged 30% between 2002 and 2006, has steadily fallen to an expected 11% average between 2007 and 2012 as debt-service commitments made at the 5th, 6th and 7th Paris Club meetings come to an end.

The primary balance had a 5.5% surplus in 2010 (up from 2.1% in 2009) thanks to higher oil revenue, and this could improve to 6.2% in 2011 as current expenditure falls and oil and non-oil revenues decline slightly.

Table 4: Public finances (percentage of GDP)

Table 5: Current account (percentage of GDP)

Source:Data from Central Bank BEAC & national authorities (DGE); 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)

Gabon has acquired more foreign partners since the beginning of 2010, giving it access to new funding from emerging countries for major infrastructure projects to meet the country’s needs for investment, economic benefits and demand for jobs, housing and welfare.

The funding, expected to generate more than 50 000 direct and indirect jobs, will come in the form of FDI from China, India and Singapore and is a good example of government plans for partnership and co-operation with emerging-country multinationals, as also mentioned in the section “Recent economic developments and prospects”.

The Nkok special economic zone will focus on wood processing (and the sector’s value chain in particular), which is one of the country’s strategic sectors after oil, with Olam, owned by a Singapore sovereign fund, as the government’s main partner. The zone is 27 kilometres east of Libreville and 40% of its 1 146-hectare area will be occupied by industry, mainly wood processing with an annual capacity of 1 million m3, which should attract nearly USD 1 billion in investments and create about 9 000 direct jobs. A one-stop shop will be set up in the zone to speed up investor formalities. The project should encourage the opening of development zones elsewhere in the country.

Palm-oil plantations were inaugurated in October 2010 at Mouila (Ngounié province) and Tchibanga (Nyanga province), savannah areas in the southwest, with a first phase of 50 000 hectares for an investment of USD 200 million and the creation of 7 000 direct and 21 000 indirect jobs. The second phase will be 150 000 hectares planted for USD 600 million, and 4 000 direct and 8 000 indirect jobs. Output should reach 1 million tonnes and make Gabon one of Africa’s leading palm-oil producers.

The partner will be Olam, with 30% of the plantations held by about 3 000 Gabonese farmers who will be given training in palm-oil plantation management. The new industry should eventually bring in annual export earnings of about USD 800 million.

An Indian firm, M3M, is building 5 000 housing units costing less than USD 20 000 each. The two-year USD 100 million project, entirely funded by M3M, was due to start in October 2010.

The national constitution was amended by parliament on 28 December 2010 by more than the required two-thirds majority (177-16) and involved 36 articles and three paragraphs.

Disagreement about how to revise the electoral register for the 2009 presidential election could have set off a serious constitutional crisis that year. The president of the constitutional court also called for amendment of the constitution, the electoral law and laws about the multi-party system, to bring the legislation into line with the constitution so as to improve the rule of law in Gabon.

The president of the parliamentary group of the majority Gabonese Democratic Party (Parti démocratique Gabonais – PDG) said the changes would correct “weaknesses” in the constitution and settle the problem of challenges to election results, the length of political-transition periods and the eligibility of presidential candidates.

The main constitutional amendments were to extend the interim period from 45 to 60 days were the presidency to be vacated; to specify the interim president’s oath of office (not previously mentioned in the constitution); to alter clauses about freedom of association and of religion, which remain basic rights; to define the president’s national defence powers; and to provide the latter with extra powers when national independence and territory are seriously threatened.

During the previous early elections in 2009, the constitutional authorities themselves had blown the whistle on a number of constitutional weaknesses. These referred most particularly to Article 13, which stated that new elections were to be held within 30 days in case of presidential vacancy unless there were exceptional circumstances noted by the constitutional court. Critics said this was unrealistic and not long enough to draw up electoral lists, issue voting cards, declare candidacies and establish polling stations.

The amendments approved by parliament in December 2010, however, were criticised by the opposition. The key changes were to Articles 4 and 10, which the opposition said gave the government a “free hand” to rig the next elections. A new paragraph inserted in Article 4 provided for maintaining public services in case of a major event, natural disaster or declaration of war on the country requiring national mobilisation, which would prevent holding elections. Without depriving citizens of the right to vote, it said, the duty to express solidarity or fight for the country could in such circumstances lead to postponement of the elections and extension of current terms of office.

The clause allows the president to decide when to hold an election, giving him an advantage, critics say.  Access to the presidency is further restricted by an amendment to Article 10 excluding candidates with double nationality, who have held political or administrative positions in other countries or do not reside in Gabon.

Some consider this a wise move to avoid difficult situations seen in other African countries, but the opposition disagrees and also objects to the changes to Article 4.

The PDG, which has been in power since 1968, were able to push the amendments through parliament, though one of its members opposed them and two others were disciplined for criticising the method of amendment.

The opposition Union nationale (UN) party was disbanded in early 2011 after its secretary-general had himself sworn in as president of the country and appointed a parallel government, after which all its members took refuge on 25 January in the offices of the United Nations Development Programme (UNDP) in Libreville.

The government announced the dismissal of all civil servants belonging to the parallel government and said the parliamentary immunity of the parallel president might be removed pending prosecution.

About one-third of the population lives below the poverty line and more than 27% are unemployed, according to the central statistics office. The government is trying to expand primary and secondary school intake capacity, to reach a maximum of 30-40 pupils per class instead of the current 150. Science education has been reorganised, with some schools specialising in it, while vocational and technical education also needs to expand its enrolment capacity.

Schooling is compulsory between the ages of 6 and 16 and enrolment was over 96% in 2010. Nonetheless, 22% of the population describes itself as having no education and about half only received primary education, 16% junior secondary and only 6% completed all stages of secondary education.

The current LMD (Licence, Master, Doctorat) system (bachelor, master’s, doctorate) should lead to more profession-oriented higher education and quicker access to jobs, but funding is an obstacle. Each doctorate student costs about XAF 3 million, and universities have trouble finding this money in the absence of tuition fees. The national education conference in the second half of 2010 recommended improving infrastructure and equipment and upgrading the status of teachers and their living and working conditions.

Health care is seen as a priority but is still in next worst shape after education, with a pressing need for local clinics, treatment capacity and access to it.

The HIV/AIDS pandemic is fading, according to the programme fighting it, PLIST (Programme de lutte contre les infections sexuellement transmissibles et le Sida). Some 49 000 people are believed to be infected and a survey began in 2010 to update this figure. PLIST says sex workers are among the hardest hit, with a 20% prevalence rate of the disease, four times higher than the national average. The figure in the army is about 4%.

Social welfare has advanced with the introduction of the welfare fund Caisse nationale d’assurance maladie et de garantie sociale (CNAMGS) and retired civil servants have been subject since January 2011 to a 1.5% levy on their gross pension and indexed bonus, which goes to the CNAMGS. In return, they get health-care coverage.

Access to safe drinking water and to electricity is still a major problem and the state firm supplying both needs to be reorganised. The government is considering regulating the sector.

The 2010 UN Human Development Index (HDI) ranks Gabon 2nd among sub-Saharan states with a rating of 0.648, and 93rd among 169 countries, in the Medium Human Development category. The HDI ranking does not match the ranking based on per capita income. Life expectancy has risen from 54.4 years in 1980 to 61.3 in 2010, and the average length of schooling from 2.3 years to 7.5. Per capita income at purchasing power parity fell 23%, however.