Gabon

Sowing the seeds of debt

D3

SENSITIVE RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD 14.21bn (World ranking 117, World Bank 2016)
Population 1.98 mn (World ranking 147, World Bank 2016)
Form of state Multiparty Presidential Republic
Head of government Ali Bongo Ondimba
Next elections 2021, Presidential
  • Relatively stable political environment
  • Good natural resource base; fourth largest oil reserves and second largest timber producer in Sub-Saharan Africa.
  • Upper middle income classification by the World Bank.
  • Membership of the CFA franc zone provides a relatively stable framework of monetary policy and reduces exchange rate and transfer risk.
  • IMF financing although with conditional implementation
  • Despite upper middle income status, levels of inequality and poverty are sources of potential social discord.
  • Lack of significant economic diversification results in high vulnerability to external shocks, especially oil changes.
  • Economic reform implementation is slow at times.
  • Infrastructure impediments and a still-difficult business environment limit economic growth potential.
  • Small and vulnerable banking sector.
  • High perceptions of corruption and weak judicial oversight.

The resource curse took its toll on the business climate

Gabon was hit by the oil price slump. Its fiscal and external balances tumbled and the previously high levels of foreign exchange liquidity followed. The political crisis that erupted after the presidential election in 2016 made things worse as worried investors triggered capital outflows.

Membership in the CFA franc currency partnership had a complex impact. On one hand, the peg to the French franc protected Gabon from a free fall of its exchange rate and inflationary pressures. Then again, it took its toll on competitiveness. Local corporates were exposed to increasing competition from companies in countries with devalued currencies.

This bad economic momentum had political consequences. The August 2016 elections were highly controversial as incumbent Ali Bongo won by a small marginby getting 98% of the vote in his home province. His challenger, Jean Ping, and other opposition parties contested the results and boycotted the December 2016 (lower parliamentary chamber) elections, which decreased the legitimacy of political institutions.

Scarcer policy options implied several deteriorations of the business climate. With lower FX reserves (1.8 months of imports currently, compared to 10 months in 2015), debt payment was made increasingly difficult. The rule of law deteriorated as well, with several threats reported on the protection of foreign investors.

The business environment is now among the worst in the region, with serious impediments to strong, sustainable growth. The World Bank’s Doing Business 2019 survey ranks Gabon 169 out of 190 countries assessed, below Comoros, Afghanistan and Burundi but above Angola, Bangladesh and Congo Republic. The survey suggests Gabon is weak in terms of registering property, and trading across borders, and makes the life of taxpayers quite difficult. Moreover, the protection of minority investors is weak and access to power is a key bottleneck. Contract enforcement and insolvency resolution can be expensive and time consuming.

Diversification: Catch me...if you can

Gabon needs to diversify its economy. The issue is not about the country’s ability to develop other sectors, but how to finance such initiatives. During the boom years (2010-14), oil revenues financed the diversification of the economy. Now, with lower oil prices, the domestic service sector stumbled into recession.

Gabon has to jump from a situation of being a borderline defaulter on its external debt (in 2016-17) to renewed growth in a context of low-for-long oil prices. Against this background, the next years should remain difficult and growth is expected to recover only partially (+2% in 2019, after +0.5% in 2017 and +1.5% in 2018). As a result, the outlook is still quite conservative and social discontent is very likely since GDP growth per capita is still about 0%.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
United States 55%
1
25% France
China 9%
2
15% Belgium
Malaysia 6%
3
13% China
Netherlands 5%
4
7% Australia
Spain 4%
5
4% United States

Trade structure by product

(% of total)

Exports Rank Imports
Petroleum, petroleum products and related materials 79%
1
10% Road vehicles
Cork and wood 7%
2
9% Other industrial machinery and parts
Metalliferous ores and metal scrap 5%
3
8% Specialised machinery
Cork and wood manufactures (excluding furniture) 2%
4
6% Iron and steel
Other transport equipment 2%
5
5% Other transport equipment

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

Contact

Contact Euler Hermes

Economic Research Team

research@eulerhermes.com

Contact Stéphane Colliac

Senior Economist for France and Africa

stephane.colliac@eulerhermes.com 

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