The International Monetary Fund (IMF) predicts that Equatorial Guinea, which is OPEC’s smallest member by capacity, is heading toward another recession this year. According to the predictions of the IMF, the country’s economy could contract by up to 7.8%, following a 3.2% growth in 2022.
Equatorial Guinea has struggled with a seven-year economic downturn that extended through 2021. The IMF’s predictions of Equatorial Guinea falling into a recession are based on a few factors. First, a decline in oil production, which accounts for over 90% of the country’s government revenue. Second, slow growth in the non-oil economy, due to persistent domestic payment arrears and underlying structural weaknesses. Third, the global economic slowdown, which is impacting demand for Equatorial Guinea’s oil and gas exports.
Crude Oil Production in Equatorial Guinea
The IMF has also warned that the country's fiscal surplus is expected to drop to 0.3% of GDP in 2023, while the non-oil primary fiscal deficit is projected to widen to 23.3% of non-hydrocarbon GDP. The external current account balance is also projected to turn into a deficit of 3.9% of GDP in 2023.
The IMF has called on the Equatorial Guinean government to implement transformative reforms and prudent macroeconomic management to reverse negative trends. However, it remains to be seen whether the government will be able to take the necessary steps, given the country's history of corruption and mismanagement.
It must be said that Equatorial Guinea is one of Africa’s least diversified economies and while other oil producers often rely on their non-oil GDP to support growth during times of market volatility, Equatorial Guinea cannot.
As was aforementioned, Equatorial Guinea is heavily dependent on oil exports, which account for over 90% of government revenue. This makes the economy vulnerable to fluctuations in oil prices and global economic conditions. Furthermore, Equatorial Guinea has a small population of just over 1 million people, which limits the size of the domestic market. This makes it difficult to develop non-oil sectors of the economy.
The government of Equatorial Guinea has acknowledged the need to diversify the economy, but progress has been slow. Some efforts have been made to develop the agricultural and tourism sectors, but these sectors remain underdeveloped. The government has also launched a number of infrastructure projects, but these have been hampered by corruption and economic mismanagement.
The lack of economic diversification in Equatorial Guinea has a number of negative consequences for the country's population. Poverty rates are high, and the economy is vulnerable to external shocks. The government's ability to provide essential services, such as healthcare and education, is also limited.
It is important to note that there are a number of other African countries that are also heavily reliant on oil exports. However, these countries have made more progress in diversifying their economies than Equatorial Guinea. For example, Nigeria has developed a significant agricultural sector, and Angola has a growing tourism sector.
The recession in Equatorial Guinea is likely to have a significant impact on the country's population. Poverty rates are already high, and the recession is expected to lead to job losses and further economic hardship. The government's ability to provide essential services, such as healthcare and education, is also likely to be impacted.