Equatorial Guinea's Economic Future: Diversification, Human Capital, and Institutional Reforms Needed for Sustainable Growth

According to the latest World Bank Country Economic Memorandum report, bold policy actions are necessary to reverse these trends and lay the groundwork for a more resilient, diversified, and inclusive economy.

Equatorial Guinea is at a critical juncture, as declining oil revenues and a lack of economic diversification have led to prolonged economic downturns, social instability, and stagnating growth. According to the latest World Bank Country Economic Memorandum report, bold policy actions are necessary to reverse these trends and lay the groundwork for a more resilient, diversified, and inclusive economy.

Historically, Equatorial Guinea’s oil wealth propelled it into the ranks of Africa’s upper-middle-income nations. However, since 2015, the country has endured six years of recession, with another downturn in 2023 after only two years of modest recovery. National per capita income has fallen to less than half of its 2008 peak, underscoring the urgent need for reform.

The hydrocarbon sector remains the backbone of the country’s economy, accounting for 39% of GDP, 76% of total exports, and 86% of government revenue. However, this sector provides limited employment opportunities and is subject to volatile global market fluctuations. Without meaningful reforms, declining oil reserves will lead to a continued drop in national income for decades.

Pathway to Sustainable and Inclusive Growth

The World Bank report outlines key priority areas to mitigate economic decline and establish a more sustainable and diversified economy. These include:

Enhancing Fiscal Stability and Transparency

Implementing fiscal discipline and exploring the creation of a stabilization fund to manage oil price volatility.

Increasing transparency and accountability of the Sovereign Wealth Fund.

Strengthening Public Financial Management

Raising non-oil revenues through tax reform, rationalizing tax exemptions, and simplifying tax procedures.

Reducing subsidies for state-owned enterprises and exploring privatization and private sector participation.

Improving efficiency in public spending.

Institutional Reforms and Governance

Strengthening the Anti-Corruption Commission to enhance transparency and accountability.

Developing a robust statistical and monitoring framework to guide economic decision-making.

Investing in Human Capital Development

Prioritizing primary education and vocational training to support economic diversification.

Strengthening healthcare systems and expanding access to essential services.

Implementing social protection measures to safeguard vulnerable populations.

Improving the Business Environment

Attracting private sector investment by addressing legal uncertainties, land titling issues, and gender disparities.

Expanding access to credit and digitalizing public services.

Accelerating Digitalization and Economic Integration

Leveraging digital tools to improve governance and service delivery.

Promoting trade facilitation and economic diversification through eco-tourism and other emerging industries.

The Road Ahead

Djeneba Doumbia, the lead author of the report, emphasized that the recent decline in hydrocarbon production and fluctuating oil prices highlight the urgent need to reduce dependency on global commodity markets. The path forward requires sustained policy efforts, investment in human capital, and a robust institutional framework to drive resilient and inclusive economic growth.

With strong governance, enhanced fiscal management, and a commitment to economic diversification, Equatorial Guinea can navigate its current challenges and unlock a more prosperous future for its citizens.