Gabon: Selected Issues and Statistical Appendix
Author: International Monetary Fund
Publication Date:
03 May 2005
eISBN:
9781451813968
Language:
English
Keywords:
ISCR; CR; oil revenue; oil; Gabon; oil windfall; revenue; GDP growth; consumer price index; wage bill; euro price; macroeconomic situation; Public expenditure review; Agricultural commodities; Agroindustries; Wages
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This Selected Issues and Statistical Appendix paper on Gabon reviews management of oil revenues, competitiveness, and growth. The nature of Gabon’s problems has not changed during the past 15 years. The need to diversify the economy and the export base; control fiscal expenditure and the wage bill; carefully assess capital expenditure; and reform public sector enterprises are the challenges that the Gabonese need to be prepared to implement adequately. Gabon faces huge medium-term fiscal constraints imposed by the expected steady decline in oil production and its depletion.

Abstract

This Selected Issues and Statistical Appendix paper on Gabon reviews management of oil revenues, competitiveness, and growth. The nature of Gabon’s problems has not changed during the past 15 years. The need to diversify the economy and the export base; control fiscal expenditure and the wage bill; carefully assess capital expenditure; and reform public sector enterprises are the challenges that the Gabonese need to be prepared to implement adequately. Gabon faces huge medium-term fiscal constraints imposed by the expected steady decline in oil production and its depletion.

III. Competitiveness and Growth9

The Gabonese authorities have resolved to resume their adjustment efforts after considerable slippages…[]. Their strategy remains that of limiting the economy’s dependence on oil, strengthening the dynamism of the private sector and the growth of the economy, and making fiscal and balance of payments positions viable (Gabon—Staff Report for the 1991 Article IV Consultation and Request for Stand-By Arrangement).

A. Introduction

1. Gabon’s major challenges have remained unchanged during the past 15 years: a drop in oil production that, sooner or later will materialize; a lack of economic diversification and poor growth in the non-oil sectors. To fully mobilize the country’s growth potential and attract new investment, it is necessary to understand and highlight the key obstacles to growth in the non-oil sectors. Is Gabon competitive enough to lay the groundwork for sustained non-oil growth and economic diversification? Has the pegged CFA franc had a negative impact on the competitiveness and profitability of tradable goods, in particular those in which Gabon has strong potential (for example, timber, manganese, palm oil, and rubber)? Are the relatively high wages and large number of public sector jobs hurting private sector development? Have oil sector developments affected the pattern and composition of growth of non-oil GDP? Has this growth been biased toward nontradable sectors?

B. Some Competitiveness Issues

Has the recent appreciation of the CFA francs in itself, affected Gabon’s competitiveness?

2. Gabon has what is still untapped potential for large productive expansion in many areas. In addition to the traditional primary non-oil sectors—that is, timber and manganese—it has the potential to develop, for example, rubber, palm oil, fisheries, coffee, and cocoa production. The profitability of these commodities is closely linked to changes in their prices measured in CFA francs, in international markets.

3. Gabon’s participation in the CEMAC area means that its currency, the CFA franc, is pegged to the euro. An appreciation of the euro vis-à-vis the U.S. dollar implies a commensurate appreciation of the CFA franc and, therefore, a decrease in the CFA franc prices of international commodities. The potential effect of this development on the profitability of tradable goods is evident.

4. Table 1 below, shows the evolution of the prices of Gabon’s main non-oil export staples (that is, okoumé and other Gabonese timber species, plywood, and manganese). It also shows the prices of commodities that meet at least one of the following criteria: (i) they are currently produced in nonnegligible quantities (that is, rubber, palm oil); (ii) in the past, they were produced in nonnegligible quantities (that is, coffee, cocoa); or (iii) they belong to a sector that is being restructured or targeted for development in the context of an agreement with an IFI (that is, fisheries). 10

Table 1.

Gabon: Developments in Key Commodity Prices and Exchange Rate for the Euro, 2001-10

article image
Sources: Gabonese authorities; and Fund staff estimates.

Actual data for 2001–04. Forecasts for 2005–10 are constructed by assuming annual percentage changes equal to those forecast for hardwood logs in the latest World Economic Outlook (WEO) exercise.

Actual data for 2001–04. Since manganese ore emulates iron ore in terms of price increases, forecasts for 2005–10 are constructed on the assumption that annual percentage changes are equal to those forecast for iron ore in the latest WEO exercise.

Actual data for 2001–04. Forecasts for 2005–10 correspond to those assumed in the latest WEO exercise.

5. As shown in Table 1, the U.S. dollar prices of these commodities have increased since 2001, in some cases significantly. These increases reflect both the robust growth of the world economy and the recent weakening of the U.S. dollar. Particularly important for Gabon are the increases in the price of manganese (almost 80 percent during 2001–04), okoumé (close to 55 percent), and Gabonese timber species other than okoumé (more than 60 percent).11

  • Although the euro has appreciated by close to 40 percent, the euro prices of the commodities that constitute the largest share of Gabon’s non-oil exports have also increased. Only the price of plywood has remained approximately constant in euro terms during the period.

  • The prices of palm oil and rubber have also increased in euro terms (more than 30 and 60 percent, respectively). Although, at this point, Gabon does not export significant quantities of these products, the favorable prices and structural reform in this area, including through the privatization of two state-owned companies during 2004 (Agrogabon and Hevegab), have attracted foreign investors.

  • Although the U.S. dollar prices of the commodities for which Gabon still has untapped potential (that is, coffee, fisheries), have increased, these increases are not high enough to offset the euro appreciation. Therefore, the prices decrease (only slightly) in euro terms.

6. Looking forward (that is for the period 2005–10), the euro price of timber (both raw and processed) is expected to increase moderately. The price of manganese, in turn, is expected to increase strongly in euro terms during 2005 and then decrease over the medium term to levels similar to those that prevailed at the beginning of the decade. Similar trajectories are forecast for palm oil and rubber. As for coffee and fisheries, a recovery in euro terms is forecast for the former while further decreases are expected for the latter. However, if 2005 is chosen as the base year, the price of fisheries is also expected to increase in euro terms.

7. Therefore, from the revenue side, Gabon’s current non-oil export staples are likely to remain profitable for the remaining of the decade. This conclusion is also valid for those staples that are produced but not currently exported (that is, palm oil and rubber); finally, with 2005 as the base year, it is also valid for those products that are not currently produced in significant quantities (that is, coffee and, in particular, fisheries).12

***

Gabon’s currency, the CFA franc, is pegged to the French franc at the fixed rate of CFAF 50 per F 1. In the 12-month period since the last Article IV consultation, the real effective exchange rate as measured by relative consumer prices, continued to decline, depreciating by a further 10 percent […]. It should be noted, however, that the weighting pattern (based on a family expenditure survey undertaken in 1968–69) in Gabon’s consumer price index is outdated, and the staff has recommended that this weakness be corrected. Moreover, other indicators, including a very high wage structure, point to a continuing lack of competitiveness in many non-oil activities in Gabon (Gabon—Staff Report for the 1992 Article IV Consultation).

Is the real effective exchange rate a meaningful measure of Gabon’s competitiveness?

8. The CFA franc devaluation of 1994 seems to have been more effective in Gabon than in other CEMAC country members (Figure A, Chart 1). In addition, the real effective exchange rate depreciations of 15 percent during 1988, about 30 percent from December 1990 to December 1993 and 13 percent from September 1998 to December 2000, compounded the effect of the 1994 devaluation.13 Did those changes reflect underlying macroeconomic conditions? Did they reflect effective gains in competitiveness? The answers to these questions are essential to determine how meaningful the real effective exchange rate (REER) is as a measure of Gabon’s competitiveness.

Figure A.
Figure A.

Gabon: Real Effective Exchange Rate

Citation: IMF Staff Country Reports 2005, 147; 10.5089/9781451813968.002.A003

Sources: Gabonese authorities; and Fund staff calculations.

9. Gabon’s REER is calculated using the inflation rate as measured by the consumer price index (CPI) (See Figure A, Charts 3, and 4). Clearly, strong price deflations of about 10 percent and 20 percent explain the real exchange rate depreciation of 1988 and December 1990-December 1993, respectively.

In contrast, prices were almost completely stable during September 1998-December 2000; thus, the real effective exchange depreciation reflected more the depreciation of the euro vis-à-vis the U.S. dollar.

10. Were the deflations of the late 1980s and the beginning of the 1990s consistent with the behavior of other macroeconomic indicators? Was the concern of the Fund’s 1992 mission justified in the latter period? One way to look at this question is to compare the nominal wage increases in the non-oil private sector to the inflation rates. While inflation rates in 1987–90 seem to have been consistent with the rates of change in the nominal wages of the non-oil private sector, the strong deflation rates observed during 1991–92 are in contrast with the increases in nominal wages (see Figure D, Chart 1).14 The increase in nominal wages in the non-oil private sector is not the only macroeconomic indicator that seems at odds with the reported inflation rates during these years: nominal primary public expenditures increased by an average of 4 percent a year, while GDP growth averaged close to 1.5 percent a year in real terms (of which, close to 1 percent in the non-oil sector). These indicators seem to cast doubt on the usefulness of the CPI to reflect relative price developments during this period.

11. Given the apparent inconsistency between the evolution of the inflation rate and the underlying macroeconomic conditions, the paper proposes a new measure to reflect domestic price developments. The modified CPI series is the same through 1985, but from 1986 to 1998 it grows according to the following rule: whenever the change in nominal wages is at least 5 percentage points higher than the inflation rate, the rate of change in nominal wages is used to compound the index instead of the CPI inflation. The results of this exercise indicate that when the modified CPI is used (see Figure A, Chart 2, Chart 3, and 4), Gabon’s REER index no longer compares favorably with that of its CEMAC partners: after the 1994 CFA franc devaluation, Gabon’s REER evolves similarly to that of Chad and Congo (both countries in which petroleum is still on an upward trend) and is below that of only Equatorial Guinea (which had an oil boom during most of the 1990s). Interestingly, this conclusion does not change significantly when nominal wages for the whole non-oil sector (that is, including wages paid to central administration employees) are considered instead of the change in private non-oil nominal wages.

***

The authorities are keenly aware of the need to contain domestic costs to strengthen the competitiveness of the economy, in the context of the fixed exchange rate of the CFA franc vis-à-vis the French franc and, indirectly, vis-à-vis other strong currencies. To that end, they are now committed to implementing a firm income policy coupled with structural reforms, especially in the area of public enterprises and the rationalization of the labor market (Gabon—Staff Report for the 1991 Article IV Consultation and Request for Stand-By Arrangement).

Are public sector employment and wages weakening the competitiveness of non-oil tradable sectors?

12. The high levels of public sector employment and wages may be weakening the competitiveness of Gabon’s non-oil tradable sectors. Indeed, when measured as a percentage of non-oil GDP, Gabon’s wage bill is significantly high by sub-Saharan Africa (SSA) standards, ranking only lower to Seychelles, Eritrea Namibia, Lesotho, Zimbabwe, and Botswana, and significantly higher to that in other CEMAC country members (see Figure D, Chart 2). The high wages of public servants may be setting the reservation wage so high that it hampers private sector development, in particular that of the tradable sectors.

13. Table 2 below shows levels of average remunerations in different sectors of non-oil economic activity for the period 1985–2000.15 These sectors are classified as “pure tradable goods” (including agriculture, non-oil mining, forestry, and timber processing), “import substitution goods” (including agroprocessing, textiles, chemical industries, and other processing industries in general), and, finally, “pure nontradable goods” (including commerce, services, transportation, construction, and financial services).

Table 2.

Gabon: Non-Oil Private Sector Wages and the Public Sector Wage Bill

(In millions of CFA francs, unless otherwise indicated)

article image
Sources: Gabonese authorities; and Fund staff estimates.

14. In addition, to non-oil private sector wages, the table shows the average nominal wage for civil servants. Note that while the ratio between the wage bill for civil servants and that in the import substituting and pure nontradable goods sectors decreases during the period, the ratio between the wage bill for civil servants and that prevalent in the pure tradable goods sector has remained approximately constant and, on average, fairly close to one. One consequence of this wage structure seems to have been a relative increase in urban employment and production. The average wage in cities is at least as high as that in rural areas (the wages of civil servants working as the reservation wage), and this could be a factor explaining the high level of urbanization in Gabon. Its counterpart has been a continuous decrease in the production of food staples, which have been increasingly replaced by imports. In addition, foresters usually complain about the shortage of labor and its relatively elevated cost.16

15. Moreover, the almost nonexistent diversification of non-oil exports combined with relatively high average wages in the import substituting sector points to the effective protection the government provides to firms in some markets (that is, sugar, beverages, among others).

16. So far, the discussion has considered wages only in the formal sector of the economy. When wages are relatively high, some entrepreneurs find it profitable to turn informal, so to avoid paying taxes and other charges. Although authorities have not tried to measure this phenomenon systematically, some surveys report that informal employment in Gabon is at least as important as formal employment (including that of the public sector). Clearly, the activities that remain formal are those that are either most efficient, or those that have market privilege.

***

The Fund and World Bank staffs have collaborated closely on Gabon. To support a program of economic reforms, the World Bank has approved […] a structural adjustment loan for Gabon. The program focuses on public sector resource management; public enterprise reform; incentives to promote private sector activities, including price and trade reforms; and sectoral policies to promote agriculture and forestry (Gabon—Staff Report for the 1991 Article IV Consultation and Request for Stand-By Arrangement).

Other competitiveness issues

17. Up to this point, the objective of the presentation was to continue to motivate a discussion that has been ongoing for the last 15 years. However, the issues discussed are only a subset of those relevant, and not necessarily, the most relevant subset.

18. Many of these issues are discussed in a report recently issued by the Foreign Investment Advisory Service (FIAS) of the World Bank that assesses the investment climate in Gabon. It underscores the fact that investment, particularly foreign, is low and provides some explanations for these low levels. Among them, it points to (i) rigidities in the labor market and the shortage of qualified labor, (ii) high factor costs, including that of public services, (iii) the “unfair” competition created by the activities that take place in the informal economy, (iv) the relatively small size of the domestic market, (v) the difficult access to bank financing, (vi) the insecurity about the appropriate conduct of justice and the application of laws, and (vii) the heavy administrative procedures, which are somewhat opaque and discretionary.17

19. The report also makes some recommendations, some of them general, about how Gabon should tackle the problems it faces. On a number of issues, however, its recommendations are more specific, including on the most appropriate role and structure of a number of government agencies and on how to improve the investment climate for small and medium-sized enterprises and eliminate red tape. The report concludes that the government should seek to promote not only foreign investment, but also domestic investment, including by targeting the “formalization” of informal sector activities.

C. What Drives Gabon’s Non-Oil GDP Growth?

Institutions and growth

20. In a paper analyzing cross-country growth behavior, Tsangarides (2005) finds that what is good for growth around the world is, in principle, also good for growth in Africa. Moreover, he finds that, in addition to initial conditions, other economic factors are robustly linked with growth, namely, higher investment, lower inflation and government consumption, a better fiscal stance, an improved political environment, favorable terms of trade shocks, and fixed geographical factors. For Africa, he finds that political and institutional variables seem to be particularly important.18

21. In this regard, Kauffman, Kraay, and Mastruzzi (2003) present estimates of six dimensions of governance, namely voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption.19 The first two governance indicators are intended to capture the process by which those in authority are selected and replaced (that is, the extent to which citizens of a country are able to participate in the selection of governments, the independence of the media, and the likelihood of disruptive changes in government, among others). The next two indicators measure the ability of the government to formulate and implement sound policies (that is, the quality of public service provision, the quality of the bureaucracy, the competence of civil servants, the incidence of market-unfriendly policies or that imposed by excessive regulation in such areas as foreign trade and business development). Finally, the last two indicators summarize the respect of citizens and the state for the institutions that govern their interactions (that is, the incidence of crime, the effectiveness and predictability of the judiciary, and the enforceability of contracts, among others).

22. Countries that rank consistently in the top 10 in the subregion for the indicators are those that present the highest levels of development and the highest per capita growth (that is, Mauritius, Botswana, South Africa, Seychelles, and Ghana). Interestingly, for 2002 Gabon ranks quite high in the subregion for regulatory quality (6) and rule of law (11). It ranks relatively high for political stability (14) and government effectiveness (15), and above average for control of corruption (17) and voice and accountability (19).20 At the same time, growth performance in most of SSA during recent decades has been sobering (IMF, 2005). This could indicate that the average level for these indicators in SSA is still relatively low, and thus having relatively high/average rankings for these indicators in the subregion could be not enough to attract investment and foster growth.21

***

The authorities share the concern expressed [..] at the time of the last consultation about the lack of diversification in the Gabonese economy and its heavy reliance on the oil sector in the face of an uncertain medium-term outlook (Gabon—Staff Report for the 1991 Article IV Consultation and Request for Stand-By Arrangement).

Has growth in the oil sector driven non-oil GDP growth?

23. Given the relative high share of oil in the Gabonese economy, those who analyze Gabon expect that developments in the oil sector will have a significant effect on non-oil growth. But is there any support for this hypothesis? What are the links through which non-oil growth and growth are connected? Figure B covering the period 1970–2004, depicts a number of relationships between oil and non-oil GDP growth in real terms (Chart 1), between oil GDP growth and growth of petroleum revenues in real terms (Chart 2), between petroleum revenue growth and primary expenditure growth in real term (Chart 3), and between primary expenditure growth and non-oil GDP growth in real terms (Chart 4).

Figure B.
Figure B.

Gabon: Some Regression Analysis

Citation: IMF Staff Country Reports 2005, 147; 10.5089/9781451813968.002.A003

Source: Fund staff calculations.

24. Some interesting issues emerge from the analysis of these relationships. First, the simultaneous impact of oil GDP growth on non-oil GDP growth is very weak. As a matter of fact, if the sample is reduced to the period 1980–2004, the association between both variables is negative and not statistically significant. Second, the simultaneous relationship between real oil GDP growth and the growth of fiscal oil revenues in real terms is positive (but not large) and also statistically weak.

25. In contrast, the relationship between the growth of primary expenditures and that of fiscal oil revenues in real terms is positive and more statistically robust. Likewise, the relationship between changes in primary expenditure in real terms and non-oil growth is positive and statistically significant.

Table 3.

Sub-Saharan Africa Aggregate Governance Indicators, 1996–2002

article image
Source: Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi, 2003, “Governance Matters III: Governance Indicators for 1996–2002,” World Bank Policy Research Department Working Paper.

26. What story can be told based on these facts? First, if oil GDP growth has affected non-oil growth, it has not done so directly and/or simultaneous, but through a different channel, with a lag, or both. Second, fiscal oil revenues, in real terms, have reacted to oil GDP growth, but with a lag.22

27. however, once fiscal oil revenues increase, the simultaneous impact of such an increase on primary expenditures seems to be significant. Interestingly, the impact on capital expenditures seems to be larger than the impact on current expenditures (see Figure B, Chart 5 and 10).

28. Additionally, once primary expenditure increases, the simultaneous impact on non-oil growth seems to be significant. Therefore, the mechanism through which real oil GDP growth has affected non-oil GDP growth seems to have been through the additional primary expenditure it generates whenever the higher oil GDP is translated into fiscal oil revenues.

29. A more relevant question is, however, how long the impact of the higher primary expenditures on non-oil GDP growth lasts. An answer to this question, even tentative, would also provide some elements for the analysis on the efficiency and effectiveness of the budgeted capital expenditure during the last 30 years. A preliminary assessment, based on the estimation of a 4-variable Vector autoregression (VAR) model (with real oil GDP growth, fiscal oil revenue growth in real terms, primary expenditure growth in real terms, and non-oil GDP growth in real terms as endogenous variables, and annual oil price changes as exogenous), seems to indicate that increases in primary expenditures financed by extra fiscal oil revenues have not produced a lasting impact on non-oil GDP growth and that its effect has been heavily concentrated in the years for which the increase in expenditures was effected. Given that the variance in primary expenditures is almost fully explained by variability in capital expenditures, this seems to indicate that the efficiency and effectiveness of this type of expenditure in Gabon have been, to say the least, questionable.23

Figure C.
Figure C.

Gabon: Impulse Response Functions

Citation: IMF Staff Country Reports 2005, 147; 10.5089/9781451813968.002.A003

Source: Fund staff calculations.

***

The fundamental objective of restoring growth and keeping it steady and sustainable requires the emergence of a broadly based non-oil sector. […] In this context, priority has been given to the development of agriculture and agrobusiness, the forestry and timber industry, the fishing and seafood industry, and small and medium-sized enterprises and indigenous service activities (Gabon—Staff Report for the 1991 Article IV Consultation and Request for Stand-By Arrangement).

Has the composition of GDP growth and employment been biased toward nontradable goods?

30. This issue, which has already been introduced (see Section A.3), is clearly relevant for at least two reasons: the composition of growth mirrors the economic incentives, and, in the context of a country whose exports depend, ex ante, on a limited number of commodities, it affects the extent to which different policies could be considered sustainable or not.

Figure D.
Figure D.

Gabon: Wages and Tradable-Goods Production

Citation: IMF Staff Country Reports 2005, 147; 10.5089/9781451813968.002.A003

Source: Gabonese authorities and Fund staff estimates. World Bank Database for Chart 2.

31. The composition of non-oil GDP employment and its growth seems to indicate that domestic relative prices may be discouraging tradable activities. Abstracting from the relatively high levels of formal non-oil employment in 1985 (year of an exceptionally high level of public investment and, therefore, high employment in the construction sector), private employment remained approximately constant during the 1990s (see Table 4). In addition to informal employment, the only other source of employment creation seems to have been the public sector.

Table 4.

Gabon: Non-Oil Formal Employment

(In number of workers)

article image
Sources: Gabonese authorities; and Fund staff estimates.

32. Extending the sample, the size of non-oil tradable activities (both pure and import substituting) in non-oil GDP has decreased from approximately one-third in the early 1970s to one-fourth during the first years of the new millennium (See Figure D, Chart 3). As a counterpart, non-oil export growth has continued to be relatively modest (2.5 percent, on average, during 1990–2003), extremely volatile and strongly concentrated in timber (80 percent of total non-oil exports) and manganese (15 percent).

***

The authorities have resolved to reverse their expansionary policies and […] sustain their adjustment efforts over the medium term in order to […] lay the basis for satisfactory economic growth. Their main objectives are to contain labor costs, which are high and constrain economic diversification and growth, and to keep aggregate demand prudent (Gabon—Staff Report for the 1991 Article IV Consultation and Request for Stand By-Arrangement).

D. Conclusions

33. The nature of Gabon’s problems has not changed during the past 15 years. The need to diversify the economy and the export base; control fiscal expenditure and, in particular, the wage bill; carefully assess capital expenditure; and reform public sector enterprises are the challenges for which the Gabonese need to be prepared to implement adequate—and, by now, well-known—policies.

34. Gabon has a window of opportunity at this time: although its cost structure remains high, euro prices for oil and non-oil traditional exports are currently buoyant. The authorities should continue to implement the structural reform program they initiated in 2003. Fiscal discipline is key to making Gabon’s macroeconomic situation more stable and sustainable in the face of shocks, which are inevitable. Although, fiscal discipline is necessary if growth is to resume, it is not enough. In addition, the Gabonese authorities need to stick to structural reforms designated to improve the private sector environment. These two acts should foster investment (both foreign and domestic) and promote growth.

35. In sum, the current fiscal and structural reform efforts must be sustained to liberate resources for private sector development, reduce fiscal pressure, lower labor costs, and change the current structure of price/cost incentives, all of which are key to promoting growth in the non-oil sectors. The fixed CFA franc vis-à-vis the euro make these efforts even more relevant.

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APPENDIX I: I. Data Sources and Description

1. Commodity prices, U.S. dollar/euro exchange rate

Okoumé, plywood made of Gabonese timber and other Gabonese timber: For 2001–04 prices are annual average export prices and were provided by the Gabonese authorities (BEAC). For 2005–10, the prices assumed are calculated by compounding each series using the assumed percentage change for Hardwood Logs included in the latest WEO exercise (March 2005).

Manganese, Palm oil, Rubber, Fish meal, Coffee (robusta), U.S. dollar/euro exchange rate: Historical and future prices are those included/assumed in the latest WEO exercise.

2. Real Effective Exchange Rates (REER)

The series for the CEMAC countries were calculated using the Fund’s ‘Effective Exchange Rate Facility’ software. The alternative series for Gabon’s REER was calculated using the annual nominal percentage change of the average non-oil formal private sector labor cost during 1986–1998, in the way described in the main text. The source for the latter is the ministry of finance (Direction Générale de l’Économie).

3. Non-oil private sector wages and employment

The series used are available for 1985–98 and their source is the ministry of planning (Direction Prévision et Statistique). For 1998–2000, these series were estimated by the ministry of finance (Direction Générale de l’Économie).

4. Governance indicators

The point estimates for 1996–2002 correspond to the sub sample for the SSA countries presented in Kaufmann, Kraay and Mastruzzi (2003).

5. National accounts

The sources for the GDP series in nominal terms (by sector of economic activity) are, (i) for 1960–1980, DGE (1986) (ii) for 1980–2000, the ministry of planning (Direction de la prévision et statistique); and (iii) for 2001–04, the ministry of finance (Direction Générale de l’Économie); and. For the GDP in real terms—measured in 1989 prices—(by sector of economic activity), the sources are, (i) for 1985–2000, the ministry of planning (Direction de la prévision et statistique); and (ii) for 2001–04, the ministry of finance (Direction Générale de l’Économie). There are no GDP series in real terms for 1960–1984. In order to have an indicator for the GDP changes in real terms both for the oil and non oil sectors, the following approximation was used: (i) for oil GDP in real terms, the level in 1985 was deflated by the ratio of the change in oil GDP in nominal terms and the price of oil, for the period 1960–85 (the source for both series is DGE (1986)); (ii) for non-oil GDP, the level in 1985 was deflated by the ratio of the changes in non-oil GDP in nominal terms and the Consumer Price index in average terms, for the period 1960–85.

6. Fiscal accounts

The sources for the series on oil and non-oil fiscal revenues and primary expenditures (both current and capital) are, (i) for 1960–1985, DGE (1986; (ii) for 1986–87, Barro Chambrier (1990) and IMF (1989); (iii) for 1988–99, BEAC (2000); and (iv) for 2000–04, IMF (2004). The series in real terms—expressed in 1989 prices—were approximated as follows: (i) for fiscal oil revenues, the series in nominal terms was deflated by the APSP index with base in 1989; (ii) for the remaining series, they were deflated by the non-oil GDP price deflator (for the period 1986–2004), and by the consumer price index (for the period 1960–1985).

7. Wage comparisons for sub-Saharan Africa

The international comparisons are based on a World Bank dataset from the website http://www1.worldbank.org/publicsector/civilservice/.

APPENDIX II: II. Vector Autoregression (VAR)

This appendix describes succinctly the VAR model that was used to derive the results reported in Section B.2. A useful reference for VAR estimation techniques is Enders (1995). The endogenous variables considered are real oil GDP growth (DROGDP), real fiscal oil revenues growth (DTP), real primary government expenditure growth (DPG) and real non-oil GDP growth (DRNOGDP). All variables are expressed as the first difference of the respective levels in logarithm terms. All changes refer to annual changes.

The series are all I(0), so the reduced VAR is stationary.24 To determine the appropriate lag length, several tests were performed. The Akaike information criterion (AIC), the Hannan-Quinn Information criterion (HQ) and the sequential modified likelihood ratio test indicate that the optimal number of lags to include is 2.25

Current and one lag changes in the price of oil (OILPRICE) were included as exogenous variables. The results of the estimation of the reduced form VAR are reported in Table A1.

Table A1:

Reduced Form Vector Autoregression 1/2/

article image
Notes:

Standard errors in () & t-statistics in []

Sample: 1971 2004 (34 observations)

The identification of the Structural VAR (SVAR) that was used to calculate the Impulse Response Functions (IRFs) depicted in Figure C, assumed that matrix A is diagonal and that matrix B has the following form:

B=[1000b211000b321000b431]

To calculate the structural coefficients used to obtain the IRFs, we assume that the structural innovations (εt) can be recovered from the observed residuals (et) using A · et = B · εt, where both εt and et are 4 × 1 vectors. The ordering of the variables consistent with this identification approach is DROGDP, DTP, DPG and DRNOGDP. In other words, shocks to oil production affect simultaneously the real oil revenues, but not the other 2 variables. Shocks to oil revenues affect simultaneously primary expenditures, but not non-oil growth. Finally, shocks to primary expenditures, affect simultaneously non-oil growth. The rationale for this identification approach follows from the discussion in Section B.3.

The estimates for the structural parameters are reported in Table A2.26

Table A2:

Structural VAR Estimates 1/

article image
Notes:Estimation method: method of scoring (analytic derivatives)Convergence achieved after 23 iterations

Finally, given that the variables used are only available at an annual frequency, the sample size is small (34 observations). Therefore, caution should be exercised in the interpretation of the results.

9

Prepared by Gabriel Di Bella.

10

The World Bank’s letter of development policy includes, in addition to forestry, fisheries, and tourism.

11

More than 80 percent of Gabon non-oil exports in 2004 were comprised by manganese and timber (either raw or processed).

12

It can be argued that the profitability of these sectors would have increased even more if the CFA franc had not appreciated vis-à-vis the U.S. dollar. However, this does not seem to be an obvious conclusion. The appreciation of the CFA franc has contributed to the stability of domestic prices and costs, including of wages, and facilitated the current social truce, thereby making Gabon more attractive to foreign investors.

13

The CFA franc was devalued from 50 French francs (FF) per CFA franc to FF 100 per CFA franc in January 1994.

14

While the CPI shows deflations that, on average, are close to 10 percent a year, nominal wages in the non-oil private sector increase by close to 4 percent a year.

15

The period considered is constrained by the availability of information. The average remunerations are calculated as the ratio between the labor value-added and the number of employees per sector of formal economic activity.

17

So far, this paper has analyzed some of the issues related with factors (i) to (iii). Interestingly, factors (vi) and (vii) will be briefly analyzed in the following section. Factors (iv) and (v) are, no doubt, interestingly enough to constitute the objective of future research.

18

Tahari and others (2004), analyse sources of growth in sub-Saharan Africa using the standard neo-classical model, as described, for instance, in Barro and Sala-i-Martin (1995). In the particular case of Gabon, they find that for the period 1960–2002, out of an average annual rate of 2.7 percent, 1.9 percent was explained by capital accumulation, 1.1 percent by labor and -0.2 percent by total factor productivity (TFP). Among CEMAC countries, the outcome for Gabon’s TFP only compares favorably with that for the Republic of Congo.

19

The analysis covers 199 countries and territories for 1996–2002. The six ‘clusters’ are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations.

20

The authors point out that the margins of error associated with these estimates are large relative to the units in which governance is measured. Thus, cross-country comparisons based on this type of data should be made with due caution.

21

According to Transparency International (2004), Gabon ranks relatively high in the subregion; however, it ranks 64 (for 145 positions) in the general sample. In SSA, among the highest ranked countries are, again, South Africa (44), Seychelles (48), and Mauritius (54).

22

The reasons for a lagged reaction have changed through the years: whereas in the 1980s and early 1990s, there were concerns that these lags responded to governance issues, in the late 1990s and in the beginning of the current decade, the lags are explained more by the type of contracts that prevalent.

23

By construction, the long-term effect of a shock in a stationary VAR converges to zero, although with varying degrees of persistence. In Gabon, the impact of higher primary expenditures financed by oil windfalls does not seem to persist for very long. A description of the estimated structural VAR that was used to obtain the impulse response functions depicted in the figures above, including the identification method and other auxiliary calculations, is included in Appendix II. Appendix I includes a description of the data and their sources.

24

Augmented Dickey-Fuller tests were performed on the variables (including and excluding a constant). The null hypothesis of a unit root is rejected in all cases at usual confidence levels. These results are available upon request.

25

Results available upon request.

26

The VAR and SVAR were estimated using Eviews 4.

Same Series

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Gabon: Selected Issues and Statistical Appendix
Author: International Monetary Fund
Volume/Issue:
Volume 2005: Issue 147
Publisher:
International Monetary Fund
ISBN:
9781451813968
ISSN:
1934-7685
Pages:
99
DOI:
https://doi.org/10.5089/9781451813968.002

Gabon: Real Effective Exchange Rate

Gabon: Some Regression Analysis

Gabon: Impulse Response Functions

Gabon: Wages and Tradable-Goods Production