The International Monetary Fund (IMF) has warned that Equatorial Guinea’s short term economic outlook remains depressed following a dip in global oil prices.
The central African nation has for two decades been one of Sub-Saharan Africa’s largest oil exporters but is facing an economic recession.
“The oil price shock since 2014 is having a major impact on Equatorial Guinea. Despite efforts to foster economic diversification in recent years, the economy remains heavily resource dependent,” IMF said in a statement.
Equatorial Guinea’s near-term outlook is very challenging, given that energy prices remain depressed, and hydrocarbon production will continue to decline.
“In 2016, weak oil revenues and limited buffers will require further cuts to public investment, leading to a further deep contraction of the large construction sector. As such, overall economic activity is expected to decline 10 percent,” the Bretton Woods institution added.
Equatorial Guinea’s Gross Domestic Product (GDP) declined by 7.4 percent during 2015, as lower hydrocarbons prices induced oil companies to reduce operating expenditures thereby reducing production, IMF said.
Non-hydrocarbon activity also slumped by 5.2 percent, due to sharp slowdown in public investment and private sector construction.
Equatorial Guinea’s terms-of-trade deterioration has resulted in a widening of the current account deficit to 16.8 percent of GDP, and a faster-than-expected draw-down of national reserves, which declined by nearly 60 percent since end-2014.
Including the government’s offshore deposits, the useable external resources are equivalent to 6.4 months of projected imports, down from 6.9 months the previous year, IMF said.
The mission called on Equatorial Guinea to accelerate reforms to revive economic growth and to foster private sector activities in sectors considered strategic, such as agriculture, fisheries, tourism, and financial services.