Country Report Equatorial Guinea December 2008

Outlook for 2009-10

• The president, Teodoro Obiang Nguema Mbasogo, is expected to be re-elected by a landslide in 2009, as the population is afraid to voice discontent and he enjoys the support of a significant proportion of the Fang ethnic group.
• Despite apparent underlying stability, given the personality-based nature of the regime, the security situation could deteriorate rapidly if MrObiang were to be forced to step down suddenly.
• There is a risk that Nigerian rebel movements operating in the Niger Delta could attack installations in Equatorial Guinea, as they have reportedly threatened the government over its dealings with the Nigerian authorities.
• Lower oil revenue and a large expansion of public spending are forecast to narrow the fiscal surplus significantly over the forecast period.
• Real GDP growth is expected to slow sharply, expanding by just 0.2% in 2009 and contracting by 1% in 2010, as no new oilfields are scheduled to come on stream and oil production at the Zafiro oilfield continues to decline.
• Inflation is forecast to fall from an estimated 7.5% in 2008 to an average of 5% in 2009-10, reflecting the stabilisation of global food and oil prices.
• After posting an estimated surplus equivalent to 9.3% of GDP in 2008, the current account is expected to record a deficit equivalent to 8.1% of GDP in 2009 and 3.9% of GDP in 2010, owing to sharply falling oil prices.

Monthly review

• The government has increased the capacity of the official media to influence international reporting on the country.
• According to an Israeli newspaper, Haaretz, Equatorial Guinea has been negotiating the purchase of military equipment worth US$100m from an Israeli company, intending to enhance the capacity of the country's navy.
• Despite the sharp rise in oil prices in the first half of 2008, foreign-exchange reserves have risen only moderately, as the government has increased capital spending and augmented its share in the country's oil blocks.
• According to Banque de France, despite a boost in export receipts Equatorial Guinea's current-account narrowed significantly in 2007, reflecting a significant rise in imports of goods and services and higher income debits.
• The effect of the global financial turbulence and the credit crunch on Equatorial Guinea's banking sector is difficult to determine, in part because of the poor quality of the monetary data available.
• The US dollar has experienced a sharp appreciation against the CFA franc, partly as a result of narrowing interest rate differentials with the euro area.

This report covers the following industry codes:
SIC Code: 10;70;47;49;60;13
NAICS Code: 212;72;48;22;52;211