In its usual periodic economic reviews of African countries, the International Monetary Fund (IMF) has profiled the economy of Gabon, giving a perspective on the country’s efforts to boost economic growth. According to the consultation report, Gabon’s growth performance has recently been strong, but fiscal pressures have also increased significantly.
As the government continues to implement its strategic plan, Stratégique Gabon Emergent (PSGE), geared at promoting economic diversification and inclusive growth, real GDP growth has averaged about 6 percent in the last four years driven by a substantial scaling-up of capital spending. The external current account has been in surplus, while inflation has remained at a low single digit. Despite sustained high oil prices until recently, the coastal country’s fiscal situation has come under pressures and arrears have accumulated partly as a result of the upgrade in public investment.
Like many other African states, its medium-term growth outlook has weakened as a result of the sudden decline in oil prices, however, this is expected to remain relatively strong as economic growth will likely be driven by a number of ongoing projects in the agro-allied, mining, and wood processing industries.
Also, the government aims to keep public debt below its target of 35 percent of GDP in the medium term by deploying conventional mainstream strategies of broadening the non-oil tax base, controlling growth in current spending, and moderating public investment growth after significantly slashing it last year. The government also intends to approach international capital markets for financing as a way of protecting infrastructure investment in the face of falling oil revenues.
According to IMF’s report, the main downside risks to the economic outlook in the short to medium term is an insufficient adjustment to fiscal policy, leading to further depletion of fiscal buffers, and weak investment execution capacity.
“Both could lead to further depletion of fiscal buffers and insufficient fiscal space to implement the PSGE and address binding constraints to growth, such as infrastructure bottlenecks, lack of qualified labor, and a weak business environment. In turn, lower oil prices and failure to implement PSGE could considerably reduce much needed non-oil growth. In the longer run, there is upside potential to raise growth if the binding constraints are addressed,” the report read.
Gabon remains a resource rich emerging economy that has attracted the likes of Shell, Woodside and Assmang in recent business development deals. As the economy continues to grow, there is the need to ensure such growth is inclusive and broad-based, while translating into reduced unemployment and poverty figures. Also, the country must seek to diversify its base and implement the necessary policies to rebuild its fiscal coffers.
By Emmanuel Iruobe
