MALABO, March 4, 2025 - Å·ÃÀÈÕb´óƬ issued today its first-ever Country Economic Memorandum report on Equatorial Guinea. The report is titled
Here are some key findings of the report:
1. Effective institutions
The discovery of large oil reserves in the 1990s propelled Equatorial Guinea to become the third-largest oil producer in Sub-Saharan Africa (SSA) and one of its fastest-growing economies. Between 1996 and 2004, annual per capita GDP growth averaged 40% with Equatorial Guinea reaching Upper-Middle-Income status in 2004. However, the secular decline of Equatorial Guinea¡¯s hydrocarbon production and revenues since 2015, combined with past shortfalls in diversifying the economy, has resulted in a prolonged recession, reversed notable economic gains, and is jeopardizing social progress.
Strong institutions and well-designed fiscal policy are critical for managing the economy and achieving sustained and diversified growth. Public revenues have been overly dependent on oil and gas, which accounted for around 80% of total revenues even after the boom. This is explained by inefficient tax policy, weak tax administration, a large informal sector, and a small, formal private sector also heavily dependent on the health of the hydrocarbon sector. The tax-to-GDP ratio in Equatorial Guinea is lower than the SSA average.
Major reforms and adjustments are needed to improve fiscal management including through strong institutions. Efficient fiscal rules can mitigate the volatility of public spending and promoting long-term stability. Sovereign Wealth Funds can be used to finance diversification efforts. Adequate domestic revenue mobilization in both the hydrocarbon and nonhydrocarbon sectors, a gradual diversification of revenue sources, and efficient management of resources are essential for expanding Equatorial Guinea¡¯s ability to finance its development goals and promote sustained and inclusive growth.
GDP per capita and World Governance Indicators
2. Investing in education, health, and social protection
Access to education in Equatorial Guinea has expanded in recent years, but still lags income peers. Government spending on education is also low, at 0.9% of GDP in 2022, compared to an average of 2.6% among fellow members of the Economic and Monetary Community of Central Africa (CEMAC) and 4.1% in SSA. Funding levels need to increase and spending priorities need to start with improving access to quality primary and secondary education, investing in skills for economic diversification, and providing better teacher training and support.
Equatorial Guinea¡¯s human capital development remains constrained by poor maternal and child health outcomes. The health sector, too, is characterized by low public expenditure at 0.7% of GDP.
Social protection is critical for achieving human capital accumulation, ensuring its productive use, and its effective protection. However, Equatorial Guinea is one of the few countries that does not have a national social assistance program in place. Spending on social assistance is among the lowest in the world at 0.1% of GDP. A new Social Protection Law envisioning universal coverage has been drafted but has not been approved yet.
Spending on education, health, and social assistance (in percent of GDP)
3. Improving the business climate
A business-friendly environment and well-functioning markets are key to supporting the government¡¯s National Sustainable Development Strategy for 2021-2035 (AGENDA 2035) and its Economic Diversification Initiative and driving private sector-led economic growth. However, the regulatory environment in Equatorial Guinea is not sufficiently supportive to investment and private sector development. Notwithstanding some progress in regulatory reforms, businesses in Equatorial Guinea still face many constraints throughout their lifecycle. Barriers to entry and discriminatory regulations hamper the private sector, including legal uncertainty, challenges in land titling, limited access to credit, and inadequate digitalization of public services.
The absence of a market-based environment in Equatorial Guinea gives rise to notably elevated operational risks for businesses, with the country exhibiting greater operational risks in comparison to its peers. The Bertelsmann Transformation Index (BTI) ranks Equatorial Guinea below peer countries on market organization and whether rules exist for stable, market-based competition.
Bertelsmann Transformation Index aggregated market organization indices for Equatorial Guinea, other CEMAC countries and structural and aspirational comparators, 2022
Building the foundations for private sector-led growth by fostering a strong business environment, reducing entry barriers, and promoting healthy competition is vital for reversing the downward trend in income per capita. Improving the effectiveness of the one-stop shop, enabling on-line registration, digitizing the database of the Commercial Registry, and reducing the minimum capital required are among steps that can improve the business environment. Competitive public procurement can also support private sector development and encourage investment. Given the large size of the public sector in Equatorial Guinea, promoting competition in these markets can allow a wider range of firms to develop their capabilities and product offering.
4. Enhancing digitalization, trade and ecotourism
Given the heavy reliance of the economy on hydrocarbon and its small size, it is critical for the country to integrate more into the global economy, especially in the non-hydrocarbon sectors. While trade openness is higher in Equatorial Guinea than in most peer countries, the role of trade in the country¡¯s economy has decreased in recent years on the back of plummeting global oil prices which have significantly impacted the country¡¯s revenues. While Equatorial Guinea¡¯s physical infrastructure (especially road network) is of good quality, its performance on soft infrastructure (i.e., logistics) is weak and trade facilitation and integration need to be improved. Lack of connectivity to foreign markets has resulted in high trade costs in Equatorial Guinea, partly due to structural factors, while the digital and ecotourism sectors ¨C two sectors with potential to connect further and transform the Equatoguinean economy ¨C are still nascent.
Logistics Performance Index, Equatorial Guinea and peers, 2018 (1 = low, 5 = high)
Exploiting opportunities from the global economy through digitalization, trade, and ecotourism would allow Equatorial Guinea to further connect with the world and promote economic diversification. Digital connectivity and digital trade policies play an important and growing role in decreasing trade costs and promoting trade across countries. The Government should strengthen the telecom sector competitiveness, increase technology adoption and participation in the digital economy for firms, boost digital skills and promote the development of digital businesses. Developing the ecotourism sector will require leveraging Bioko¡¯s relatively developed infrastructure and tourism facilities to catalyze the ecotourism segment in the short term, reforms to address constraints to demand and supply, and sustained investments in infrastructure, training and branding.