Economic diversification is crucial for unlocking new sources of growth in Equatorial Guinea, says new report

Economic diversification away from oil, investing in its people and strengthening institutions are crucial for stemming economic decline in Equatorial Guinea, says the World Bank in its latest Country Economic Memorandum report on the country.

The decline in the country’s oil revenues, combined with past shortfalls in diversifying the economy, has resulted in a prolonged recession, reversed economic gains, and jeopardized social progress. Equatorial Guinea’s abundant oil resources propelled the country into the exclusive group of African upper-middle income nations. However, the economy suffered six years of recession since 2015 and fell back into recession in 2023 after just two years of growth. National per capita income has also been declining and stands at less than half that of its peak in 2008.

To attain sustainable and inclusive growth going forward, a greater focus on building human capital and strengthening the business environment and institutions is needed, says the report, titled Equatorial Guinea Country Economic Memorandum – Building the Foundations for Renewed, More Diversified and Inclusive Growth.

“Equatorial Guinea has the potential to transform its economy and improve the lives of its citizens. However, this requires bold policy actions to build the foundations for renewed, diversified, and more inclusive growth,” said Aissatou Diallo, World Bank Resident Representative for Equatorial Guinea.

The hydrocarbon sector represents 39% of the country’s GDP, 76% of total exports, and about 86% of government revenues, but it provides few job opportunities. Without strong reforms and with progressive decline in hydrocarbon reserves, per capita income is projected to continue falling for decades to come.

The report provides a roadmap to help counter the country’s economic decline and enable Equatorial Guinea to embark on a new growth trajectory that is sustainable and inclusive – grounded in the development of human capital, an enabling environment for private sector activities, and strengthened institutions and governance. Priority actions include:

• Reducing fiscal instability and enforcing fiscal discipline, exploring options for creating a stabilization fund to manage oil price volatility, and enhancing transparency and accountability of the Sovereign Wealth Fund.
• Improving public financial management by raising non-oil revenues through rationalization of tax exemptions and simplification of tax procedures, developing a strategy to reduce subsidies to state owned enterprises, exploring divestment and other private sector participation options, and improving efficiency of public spending.
• Strengthening governance by fully operationalizing the Anti-Corruption Commission and strengthening statistical and monitoring capacity.
• Investing in human capital: Equatorial Guinea ranks relatively low on the Human Development Index, with lower education and health outcomes compared to income peers resulting from inadequate social spending and weak public service delivery. There is a need to prioritize primary education, invest in skills for economic diversification, strengthen public health, and adopt social protection measures.
• Improving the business climate to attract private sector investment and promote economic diversification; remove barriers to entry and address challenges such as legal uncertainty, land titling issues, gender gaps, limited access to credit, and inadequate digitalization of public services.
• Accelerating digitalization, integrating into the world economy with a focus on trade facilitation, and promoting diversification through eco-tourism.

“The recent decrease in Equatorial Guinea’s hydrocarbon production and the volatility of oil prices are a strong reminder of the need for the country to reduce its exposure to global commodity markets. Sustained policy actions and efforts to develop the non-oil sector, boost human capital development, enable the private sector, and strengthen legal, fiscal, and economic institutions can help promote resilient, sustained, and inclusive growth,” said Djeneba Doumbia, lead author of the report.

Distributed by APO Group on behalf of The World Bank Group.

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