Country Report Equatorial Guinea April 2009

Outlook for 2009-10

• The president, Teodoro Obiang Nguema Mbasogo, is expected to be re-elected by a landslide later this year, supported by harsh, repressive measures and the backing of a significant proportion of the Fang ethnic group.
• Despite apparent underlying stability, the security situation could deteriorate rapidly if ill health were to force MrObiang to step down suddenly, given the personality-based nature of the regime.
• Following an attack on the presidential palace in February, there is a higher risk that Nigerian rebel movements operating in the Niger Delta could attack installations in Equatorial Guinea.
• Economic diversification will remain the government's main economic policy objective, but the regime will be forced to re-evaluate its economic development programme in line with lower oil prices and reduced output.
• Real GDP is expected to grow by a mere 0.4% in 2009 and to contract by 1.3% in 2010, owing to an expected fall in oil production.
• Inflation is forecast to fall to5% in 2009 owing to a decline in global food and oilprices and to 4% in 2010, reflecting lower government spending.
• After posting an estimated surplus equivalent to 7.9% of GDP in 2008, the current account is expected to record deficits equivalent to 16.8% of GDP in 2009 and 9.3% of GDP in 2010, owing to a dramatic fall in average oil prices.

Monthly review

• Little has emerged about the identities or the objectives of those responsible for the February attack on the presidential palace.
• Although the regime has denied the possibility that the February attack was an attempted coup, several members of an opposition party have been arrested in connection with the assault.
• Mr Obiang has sacked the minister of national security and several prominent army officers, reportedly because of the ineffectiveness of the army in repelling the attack.
• The IMF has expressed concern over the planned increase in capital expenditure projected by the 2009 budget, and over the lack of progress in implementing projects falling under the Social Development Fund.
• Newly published data show that in recent years the non-oil economy has grown more rapidly than previously estimated, mostly owing to large increases in public spending.
• The IMF has warned the government not to crowd out private investment by taking a leading role in strategic economic sectors.