In 2005, economic growth in Gabon picked up to almost 3 percent and inflation remained close to zero. Non-oil growth, led by rising timber processing, manganese production, and the services sector, reached 4V percent. Meanwhile, buoyant international oil prices resulted in continued large balance of payments and fiscal surpluses, allowing a reduction in external debt to 39 percent of GDP at end-2005, the IMF said in its latest economic review of the country.
However, oil reserves are expected to be exhausted in about 30 years, and Gabon will need to reduce its dependence on oil over the medium term.
The IMF Executive Board noted that Gabon’s key policy challenge is to strike a balance between preparing for the exhaustion of oil reserves by raising public savings and dealing with continued pressures for public spending. Most Directors called for an immediate fiscal adjustment that would make significant progress toward a fiscal position that is sustainable over the medium term.
|(annual percent change, unless otherwise indicated)|
|Real non-oil GDP||0.8||2.3||4.4||3.6|
|Consumer prices (annual average)||2.1||0.4||0.0||1.0|
|Non-oil primary balance (percent of non-oil GDP)||-8.2||-7.7||-12.1||-8.9|
|External public debt (percent of GDP)||55.9||49.6||39.2||31.8|
The Directors also underscored the importance of strengthening public expenditure management and, toward that end, called for a more effective prioritization of the public investment program, stronger budget execution and monitoring, improved transparency of the budget—notably of oil revenue—and greater efficiency of the tax system through a broadening of the non-oil revenue base. They also pointed out that costly implicit subsidies on petroleum products that benefited primarily higher-income house-holds were growing rapidly. They encouraged the authorities to reflect these subsidies fully in the government budget and to gradually adjust retail prices toward import parity levels, with well-targeted assistance to the poor.
The Directors commended the authorities for their Growth and Poverty Reduction Strategy Paper but under-scored the need to formulate concrete poverty-reducing programs and accelerate the structural reform agenda to stimulate higher growth. In this context, they emphasized the importance of improving the investment climate to foster private sector development. The Directors also noted that further trade liberalization would improve Gabon’s competitiveness, and they urged the authorities to take a leading role in regional discussions with the Economic and Monetary Community of Central Africa in this area.