The economy of Gabon has been driven in large part by its abundant wealth of natural resources, which have allowed it to support one of the highest per capita GDPs on the continent. However, the country’s economy has reached a critical juncture in 2016, with the decrease in the international price of oil since mid-2014 having both highlighted the need for and increased the urgency of plans to diversify the hydrocarbons-dependent economy, while simultaneously reducing the availability of government financing to achieve this transformation.
As a result, the government, which in 2009 launched its guiding economic strategy, Emerging Gabon Strategic Plan (Plan Stratégique Gabon Emergent, PSGE), has hastened its efforts to expand the scope of economic activity, with several major new agricultural projects due to come on-stream in the near future. Furthermore, the authorities have adopted a range of additional measures to deal with the current challenges stemming from the lower oil price environment, including stepped-up efforts to improve the business environment and thereby compensate for reduced state investment capacity through additional private investment.
Composition & Growth
The secondary sector accounted for 23.6% of GDP in 2015, extractive industries 33.2% (including oil production, which represented 22.7% of GDP), and the tertiary sector 23% (including 11% from services), according to figures from the General Directorate of the Economy and Fiscal Policy (Direction Générale de l’Economie et de la Politique Fiscale, DGEPF). The total value of Gabon’s combined economic output for 2015 stood at CFA8.48trn (€12.7bn) in local currency terms, according to the DGEPF. At constant prices, growth was up by 3.9% in 2015, driven in large part by an 8.6% rise in oil production, although at current prices GDP contracted 5.6% year-on-year (y-o-y), driven by a 18.3% y-o-y fall in the value of oil output.
In May 2016 the Bank of Central African States (Banque des Etats de l’Afrique Centrale, BEAC) estimated that 2016 real GDP would growth to reach 3.4%, while the DGEPF forecast a slightly lower figure of 3.3%. In April 2016 the IMF updated its World Economic Outlook database and estimated a figure of 3.2%, though this was based on a higher estimate of 2015 GDP growth at 4%. In its Article IV consultation for 2015 the IMF also predicted that factors such as the imminent launch of major oil palm and rubber industry agricultural projects could help boost average annual real GDP growth to around 4.5% over the medium term.
Impact
In keeping with the diversification strategy, the non-oil economy has been expanding rapidly in recent years, with non-oil growth experiencing an average annual growth rate of nearly 7% (at constant prices) between 2011 and 2015, according to the DGEPF. The non-oil segment witnessed a slump in 2015, with growth falling to 3.2%.
According to the DGEPF, the farming sector is expected to help drive non-oil growth in 2016 with an expansion rate of 8.9%, led by a major rise in palm oil production from 1578 tonnes in 2015 to an expected 9700 tonnes in 2016, as joint venture projects with Olam International begin to come on-stream. Mining output is also expected to more than double, by 102.9%, and wood industry output is set to increase by 7.5%. Factors such as preparations for the Africa Cup of Nations, which Gabon is due to host in 2017, are set to help the construction and public works sector to expand by 6.9%, according to the DGEPF. The government also expects agriculture to grow by some 20% in 2017 as further palm oil and rubber projects come on-line.
Population & Per Capita Income
The population stood at approximately 1.7m in 2015, according to the World Bank. As with many markets in the region, Gabon’s people are predominantly young, with around 37% being under 15 years of age, making employment generation a key economic issue. The population is expanding rapidly, at an average annual rate of 3.4%, according to the BEAC.
According to figures from the World Bank, per capita GDP stood at $8312 in 2015, more than five times the average for sub-Saharan Africa of $1571. This makes Gabon the fourth-wealthiest country in the region, after the Seychelles, Equatorial Guinea and Mauritius. However, high levels of income inequality mean that a substantial proportion of the population live below the poverty line.
Employment & Unemployment
Unemployment is high, in part because one of the mainstays of the economy, oil production, is not labour intensive, while the dominance of oil in the economy renders it difficult to launch more labour-intensive sectors. As a result, some observers say the oil crisis will have a positive impact for Gabon’s people. “Given our wealth of oil resources and a large state presence, an entrepreneurial mindset has not been commonplace here,” Serge Dadja Tabo, partner at consultancy KPMG, told OBG. “As prices and labour have become more realistic, the slowdown opens up new opportunities for human development.”
The World Bank put unemployment at 19.7% in 2014, which is the latest available data, while the IMF estimated the 2015 figure at 28% and projected this to rise by another percentage point in 2016. Joblessness is particularly high among youth, with the World Bank putting the rate at 30.9% for males and 40.8% for females aged 15-24 in 2014. The overall labour force participation rate stood at 61% in 2014. The public sector workforce is large at around 101,700 people in 2015, equivalent to around 6% of the population. Major private sector employers include services, at 15% of the private sector workforce, according to the DGEPF, followed by transport (13.3%) and agriculture (12.5%).
Inflation & Monetary Policy
Low GDP growth and falling fuel costs (as a result of the decrease in oil prices) helped bring inflation down from 4.7% in 2014 to an estimated -0.3% in 2015, according to BEAC figures. Both the bank and the IMF are expecting 2016 inflation to reach 2.5%, while the DGEPF forecasts a lower rate of 1.4%.
With the threat posed by inflation receding on the regional level, the BEAC’s policy rate has been on a downwards trend in recent years. In July 2015 the bank cut the rate by 50 basis points to 2.45%, where it still stands. At its most recent meeting in July 2016, the bank’s monetary policy committee decided to leave the rate unchanged, despite having reduced its 2016 GDP growth forecast for the CEMAC region as a whole from 2% to 1.7%.
In mid-2015 the bank also decided to raise the refinancing ceiling for Gabonese banks (the limit was also raised by varying amounts in other CEMAC countries) from CFA60bn (€90m) to CFA100bn (€150m) to help deal with the oil price drop.
FOREX
As a member of the CEMAC region, Gabon uses the Central African franc (CFA) as its currency. Since 1999 the currency has been pegged to the euro at a rate of €1:CFA655.957. As a result of changes in the value of the euro against the dollar, the currency has strengthened slightly against the dollar over the course of 2016, from $1:CFA604.10 at the start of the year to $1:CFA588.79 by early October. The country’s foreign exchange reserves stood at CFA358.7bn (€538.1m) as of the end of 2014, according to the latest available data from the DGEPF, down from CFA784.6bn (€1.2bn) in 2013. The IMF estimated Gabon’s contribution to reserves at the BEAC to cover a little under seven months of imports as of September 2015 – though reserves at the BEAC are pooled among CEMAC members and the fund estimated total BEAC reserves at slightly less than five months’ worth of CEMAC imports.
Global Partners
The EU and China are by far Gabon’s most important trade partners. The EU collectively ranks first with bilateral trade flows of €2.65bn, accounting for 29.2% of the country’s total trade with the world (37.5% of imports and 24.8% of exports), according to figures from the European Commission. China came in second with €1.56bn and 17.5% of the total (21.4% of imports and 15.5% of exports), and the US was a distant third with €478m and a 5.4% share (6.5% of imports and 4.7% of exports). The country’s trade balance with the EU moved into negative territory in 2015, to a deficit of €538m, for the first time since 2008; the balance had stood at €350m in Gabon’s favour in 2014.
Looking at trade on an individual country level, Gabon’s largest source of imports was France with a total of CFA429.6bn (€644.4m), followed by Belgium (CFA214.7bn, €322.1m), according to DGEPF figures. The US filled out the top three with CFA211.1bn (€316.7m). Gabon’s largest export market was China, with total exports CFA507.7bn (€761.6m), followed by Trinidad and Tobago (CFA396.1bn, €594.2m) and the Netherlands (CFA298.2bn, €447.3m).
Trade with fellow CEMAC members is fairly low, in line with broader limited levels of intra-regional commerce. Cameroon was the largest CEMAC exporter to Gabon in 2015 and the only member state in the top 20 export partners, with CFA42.1bn (€63.2m), making it the seventh-largest source of imports, according to the DGEPF. The Republic of Congo was Gabon’s largest regional export market, with total exports of CFA14.2bn (€21.3m), ranking it the 20th-largest foreign market for the country.
Trade Accord
Discussions are under way between the EU and Gabon on an economic partnership agreement, which would significantly liberalise trade between the two. Such an agreement would help boost Gabonese wood exports to the bloc in particular, and would also have a wider impact on Gabon, which due to its reclassification as an upper-middle income state, became ineligible for the EU’s Generalised Scheme of Preferences in early 2014. However, there has been little recent progress towards an accord.
Trade Balance
According to DGEPF figures, a sharp fall in international oil prices in 2015 saw the value of Gabonese crude exports fall by a third (33.2%) in 2015 from the previous year to CFA2.52trn (€3.8bn) – on top of a 9.9% decline from 2014 – as the average export price dropped from CFA341,000 (€512) per tonne in 2014 to CFA207,900 (€312). By May 2016 the BEAC expected a further fall in the average export price to CFA141,900 (€213) a tonne in 2016. Crude exports accounted for 75.4% of total exports in 2015, down from 84.6% in 2013, according to the DGEPF. Largely as a result of the drop in oil exports, the value of the country’s trade surplus fell from CFA3.23trn (€4.9bn) in 2013 to CFA2.76trn (€4.1bn) in 2014 and CFA1.69trn (€2.5bn) in 2015. Total exports were down from CFA4.69trn (€7bn) in 2015, while imports fell by a smaller amount from CFA1.83trn (€2.7bn) to CFA1.65trn (€2.5bn).
Current & Capital Account
Largely due to the deterioration in the country’s trade balance, the current account, having been in surplus to the tune of CFA1.13trn (€1.7bn) in 2013 and CFA699bn (€1.1bn) in 2014, turned into a small deficit in 2015, worth CFA17.2bn (€25.8m), according to the DGEPF. This was despite an improvement in the balance of the income account, from a deficit of CFA876.6bn (€1.3bn) in 2014 to one of CFA697.7bn (€1.1bn), and a smaller improvement in the balance of services, from a deficit of CFA945.1bn (€1.4bn) in 2014 to CFA875.4bn (€1.3bn) in the red.
Despite a decline in foreign investment in 2015, and in contrast to the current account, the capital account deficit dropped over the course of 2015, from CFA340bn (€510m) to CFA114.2bn (€171.3m).
Foreign Investment
Prior to 2015 Gabon had been attracting growing amounts of foreign direct investment (FDI), with total FDI inflows crossing the billion-dollar mark at $1.01bn in 2014, according to figures from the UN Conference on Trade and Development. This was up from $771m in 2013 and $499m in 2010. However, against a backdrop of falling oil prices (the majority of FDI goes to the hydrocarbons sector), the figure fell in 2015 to $624m. Nevertheless, recent years of rising investment have helped to dramatically expand FDI stock over the course of the first half of the decade, from $2.87bn in 2010 to $6.81bn in 2015.
Investment Climate
International rankings data suggests that Gabon has an attractive business environment by regional standards, but one that performs poorly by broader metrics. The country was the highest-ranked CEMAC member state in the World Bank’s 2016 “Doing Business” survey, but placed 162nd out of 189 countries overall, dragged down by particularly poor scores in categories such as registering property, enforcing contracts and dealing with construction permits.
However, the authorities are taking measures to try to improve the investment climate in the country, and in 2014 a new body was created, the High Investment Council (Haut Conseil de l’ Investissement, HCI), which is mandated with increasing the amount of cooperation between the public and private sectors and stimulating private sector growth more generally. By the summer of 2016 the body did not appear to have convened, but it is expected to do so in the near future. In January 2015 the government also announced plans for a new economic initiative to further improve the investment climate, known as the National Pact of Adjustment for Competitiveness (Pacte National d’Ajustement pour la Compétitivité, PNAC). The initiative, which was created with a new urgency regarding the need to diversify the economy to compensate for falling oil revenues in mind, has yet to be finalised, with the strategy document laying out its objectives due to be approved by the first session of the HCI.
The authorities have also launched a new agency to both facilitate and promote investment in the country, the Gabon National Agency for the Promotion of Investment, which was established by government decree in September 2014. The body, which is being created through the merger of three previous investment-related government organisations and which should be up and running in 2017, will act as a one-stop administrative shop for investors, as well as overseeing the implementation of the PNAC, among other roles. Part of the project’s aim is to significantly reduce the amount of time it takes to start a new company from around 20 days currently to less than 48 hours.
Diversification Efforts
While the collapse in the price of oil since mid-2014 has underlined the importance of reducing the economy’s reliance on hydrocarbons production, the government, concerned about the non-renewable nature of Gabon’s natural resources and keen to boost employment opportunities, had begun efforts to expand other sectors well before oil prices began to fall.
In 2009 the authorities launched a major new economic diversification strategy, the PSGE. The plan aims to achieve sustainable economic development that will create 325,000 new jobs, as well as attain emerging market status for the country by 2025, and is based around three sub-plans or pillars. These include Green Gabon, which is focused on agriculture/agribusiness, timber and tourism; Industrial Gabon; and Services Gabon. The programme has been accompanied by major investments in infrastructure, including both road and rail networks, with the aim of supporting economic development and diversification. For example, the authorities are planning to double the capacity of the country’s Transgabonais railway line by 2023, which will help move wood and mineral products from the interior to the Port of Owendo.
Agricultural Commodities
One key focus of the Green Gabon pillar is tourism. The country has a long, largely unspoiled coastline and particular appeal as an ecotourism destination, given the coverage of much if its territory by highly biodiverse rainforest (see Tourism chapter). However, a more prominent focus of Green Gabon is the development of major agricultural commodity export sectors, in particular timber and wood products, rubber, palm oil, cocoa and coffee (see Agriculture chapter). In 2010 the authorities banned the export of unprocessed timber to encourage the development of domestic processing and wood products industries, a move which has had a significant impact. According to the DGEPF, the wood industry grew at an average annual rate of 17.3% between 2010 and 2015, having been in contraction in previous years. To encourage the development of the sector, the government also created wood-focused industrial zones, known as domaines industriels du bois, at Lastourville and Ndjolé. The authorities are also working to dramatically boost the rubber and palm oil production. SIAT Gabon, a unit of Belgian agribusiness firm SIAT, already operates rubber and palm plantations in the country and is currently expanding, with plans in place for new rubber plantations via 40:60 joint venture projects with Singaporean agribusiness company Olam International.
Adding Value
The Industrial Gabon pillar is also focused on the development of natural resources, in its case primarily as regards locally produced minerals through the development of downstream value-added activities such as fertiliser production using locally produced gas (see analysis) and metallurgy using the country’s iron ore deposits, as well as improvements in power and water infrastructure to support such sectors (see Industry chapter). A key component of the pillar was the creation of a new metallurgy complex at Moanda, which was inaugurated in June 2015 and focuses on processing manganese, one of the principle outputs from the mining sector. A new mining and metallurgy school also opened in the town in June 2016.
Economic Zones
A key contributor to Industrial Gabon, as well as its agribusiness-focused counterpart, is the creation of a number of special economic zones (SEZs) dedicated to different industries in the country, one of which – the Nkok SEZ, which is located near Libreville and has a focus on the wood industry – is already up and running, with around 15 factories in operation (see analysis). Such efforts have helped to establish a genuine industrial production centre. “While companies in the wood industry have not yet really begun producing finished products, some are now producing semi-finished products for export, most of which go to the Middle East and Asia,” Yves Picard, director of the French Development Agency’s Gabon operations, told OBG, adding that there was a need for increasing the emphasis on marketing efforts, better management and optimising manufacturing processes to further boost output.
Developing Services
The PSGE’s final pillar, Services Gabon, includes plans to develop the country’s digital economy through the deployment of a 1075-km fibre-optic cable backbone through the country from Libreville to the Congolese border, where it will link up with other African networks, providing high-speed internet coverage to around three-quarters of the population. The project is due to be completed by the end of 2016, and as of June of that year 82% of the line had been finished, putting it around three months behind schedule, with further efforts to extend the network to follow. The pillar also includes plans to boost the hospitality sector, among other initiatives.
Next Phase
Work on a roadmap for a second phase of the PSGE is also under way. This will reportedly shift the plan’s focus towards social development by, for example, boosting the provision of health care and education and training, the current state of which is often cited as an obstacle to reducing the country’s reliance on oil. “The availability of a trained workforce with sufficient skills is something of a chokepoint as regards diversification efforts,” Picard told OBG, adding that donors, in addition to the government, are increasingly focusing on the education sector to address the problem.
Outlook
Gabon’s immediate economic prospects depend to a large extent on highly unpredictable international oil prices. However, more broadly, economic diversification efforts are set to bear increasingly fruitful yields in the coming years – though persistent low oil prices would limit the availability of investment in such efforts and attendant infrastructure improvements, potentially slowing the pace – with several major agribusiness projects coming on-stream. This should help to underpin strong non-oil growth and move the country towards a more stable and sustainable footing.
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