Gabon: Risk Assessment
Country Rating1
Rating: B
Business Climate Rating1
Rating: C
Risk Assessment2
GDP growth driven by extractive industries, forestry operations and public spending
Economic growth recovered sharply in 2010 and is expected to remain relatively strong in 2011. This rebound has been underpinned by the growth of investment and production in the manganese sector and forestry operations (ranked second and third in export earnings behind oil) with crude production, meanwhile, in a virtual standstill. Services have benefited from the increase in consumption fueled by the growth of household income. And the rise of oil prices has spurred the growth of tax revenues, which is expected to facilitate implementation of an ambitious government investment program in infrastructure. The downward trend of oil production has been slowed by the discovery of small new fields. And the mining sector, with the major Belinga iron deposit remaining unexploited, offers substantial potential for diversifying the economy, while steps have been taken to enhance the value of the wood industry.
Despite the strengthening of domestic demand, prices fell slightly in 2000, a trend attributable to intense competition in the mobile telephony sector and controls on domestic prices for energy. And inflation is expected to rise just slightly in 2011.
Still solid financial position
The upturn of raw material prices and the growth of foreign demand have driven the rise of merchandise exports. Concurrently, however, imports of capital goods and services, along with profit repatriation by foreign investors, have rebounded, thereby limiting the size of the current account surplus. Gabon's overall financial position remains solid even though the fiscal and current account surpluses have contracted since the crisis. Public sector finances have improved substantially since 2008 thanks to early repayment of the debt contracted with the Paris Club (with public sector debt brought down to 21% of GDP in consequence). That has, nonetheless, not prevented the government from making late payment of the first coupon of a bond, early 2009. Debt sustainability will, in any case, remain vulnerable to cyclical movements of oil.
A relatively stable political situation
The political transition following the election of Ali Bongo as head of state in August 2009, after the death of his father Omar Bongo, proved to be relatively smooth although the announcement of the election outcome initially triggered a movement of contestation. The ruling Parti démocratique gabonais lost only two seats in the June 2010 by-election and is expected to keep the majority in the 2011 legislative elections but nonetheless continue to lose ground. Contending with combative opposition and popular discontent and seeking to consolidate his legitimacy, the new president launched a vast modernization program intended to improve the country's governance.
Strengths
- Natural wealth including oil, forestry and mining (manganese, iron ore, gold)
- High economic development compared to the regional average
- Sharp reduction in debt level, thanks to the debt buyback negotiated in 2008 with the Paris Club
Weaknesses
- Inadequate transport and energy infrastructures
- The small size of the Gabonese market is a drawback for investment in manufacturing
- Heavy dependence on oil (80% of exports) despite diversification efforts
- Recurrent slippage in budget execution
- Lack of household savings
- Untapped tourism potential