Equatorial Guinea

Executive Summary

The Republic of Equatorial Guinea is endowed with oil and gas resources that attracted billions of dollars in direct U.S. investment instrumental to extracting those resources. Discovery of oil in the 1990s resulted in rapid economic growth by the late 2000s. Growth has slowed as several operational oil fields have matured and are now in decline. Equatorial Guinea is among the world’s lowest ranking countries in various global indices, including those for corruption, transparency, and ease of doing business. Some companies have reported that these ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate, with corruption, perceptions of a biased judiciary and a burdensome, inefficient bureaucracy undermining the general investment climate in the country.

The government of the Republic of Equatorial Guinea is seeking investment in several underdeveloped sectors: agribusiness; fishing; energy and mining; petrochemicals, plastics, and composites; travel and tourism; and finance. The Equatoguinean domestic market is small, with an estimated population of 1.2 million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, comprising more than 50 million people. The zone has a central bank and a common currency – the CFA franc, which is pegged to the euro. Equatorial Guinea graduated from “Least Developed Country” (LCD) status in 2017 and recently reactivated its efforts to accede to the World Trade Organization. Equatorial Guinea became a full member of the Organization of the Petroleum Exporting Countries (OPEC) in 2017 and is a member of the Gas Exporting Countries Forum (GECF).

Equatorial Guinea’s economy has suffered from the effects of the COVID–19 pandemic. The drop in global demand and oil prices occasioned by the crisis, coupled with the drop in household consumption and the slowdown in business activities due to measures to contain the spread of the disease, exacerbated the country’s already serious growth problems. Real GDP shrank 6.1% in 2020, compared with 5.6% in 2019. It was the eighth consecutive year of recession due to growth problems in both the oil (–7.2 %) and nonoil sectors (–4.7%). On the demand side, investment contracted by 35%. Although output fell, prices rose. Inflation was 3% in 2020, up from 1.2% in 2019, the result of a pandemic-related decline in the terms of trade, reduced supply of essential goods, and a worsening monetary situation. As a result, the Bank of Central African States gave up trying to reduce liquidity in the banking system and proposed a series of measures to support the economies in the Economic and Monetary Community of Central Africa (CEMAC) by cutting the policy interest rate and the marginal lending facility rate from 3.5% to 3.25%, and from 6% to 5%, respectively.

The country’s gross domestic product (GDP) shrank nearly 50% between 2014 and 2019, from USD 21.7 billion to USD 11 billion. The economy is expected to grow 2.6% in 2021, a projection based on the successful completion of a large gas project and the recovery of the world economy by the second half of the year. The country is expected to again return to recession in 2022, with a real GDP decline of -4.4%. The inflation rate is expected to settle at 2.9% over the next two years, remaining within the CEMAC limit of 3%. The budget is expected to be in a deficit of 2.4% of GDP in 2021 and 1.5% of GDP in 2022. The current account balance is expected to remain in deficit at 6% of GDP in 2021 and 5.6% the following year. The country’s main risk factor, beyond the persistence of the pandemic, remains the lack of diversification of its oil-based economy, to which is added the structural weakness of inadequate human capital. Indeed, the country has a capacity deficit, particularly in terms of public finance management and governance, that hinders effective implementation of its economic and social transformation policy.

On December 18, 2019, the Executive Board of the International Monetary Fund (IMF) approved a USD 282.8 million, three-year Extended Fund Facility (EFF) for Equatorial Guinea. The arrangement was intended to support Equatoguinean authorities’ three-year economic program, which aims at further reducing macroeconomic imbalances and addressing financial sector vulnerabilities; improving social protection and human capital development; promoting economic diversification; and fostering good governance, increasing transparency, and fighting corruption—all with the overarching aim of achieving sustainable and inclusive economic growth. Equatorial Guinea’s Fund-supported program was also intended to serve as a mechanism to spur additional external resources as well as contribute to rebuilding the CEMAC regional reserves. The new Minister of Finance, Economy and Planning, Valentin Ela Maye Mba, is tasked with improving the country’s economy and fiscal situation, including working with international financial institutions. The new three-year plan was supposed to increase revenue through greater tax compliance among individuals and greater public payment for utilities, such as water and electricity. Government leaders have publicly stated that good governance is important, and there were several bills proposed or passed in 2020 and 2021 to help, including the Fiscal Incentive Law to increase tax compliance by registering the tax obligations of individuals; and the Anti-Corruption Law, which has been under discussion for more than a year. Foreign businesses continue to express challenges and concerns about new regional banking and foreign exchange regulations implemented by the Bank of Central African States (BEAC) given the lack of liquidity in the local banking sector.

Despite various challenges, U.S. businesses have mainly had success in the hydrocarbons sector. Some U.S. businesses have profited in other sectors, such as technology and computer services. Various international companies continued to enter the market in response to new licensing rounds in the hydrocarbons and mining sectors. U.S. businesses may find investment opportunities in other sectors such as telecommunications, infrastructure, agriculture, mining, security, and transportation.

Since the onset of COVID-19, Equatorial Guinea has been proactive in safeguarding opportunities for foreign investors and continuing to drive capital into its hydrocarbon resources. Investors have reported that past commercial disputes have involved delayed payment, or non-payment, by the Government of the Republic of Equatorial Guinea to foreign firms for delivered goods and services. Certain companies reportedly exited the country with millions in unpaid bills.