MALABO, October 8, 2024 - The World Bank today issued the 2024 Equatorial Guinea Economic Update which analyzes the country's recent economic developments and outlook and highlights the importance of designing effective fiscal instruments for sustainable forestry and economic diversification.
Following two years of recovery, the economy of Equatorial Guinea contracted by 5.7% in 2023, driven by a decline in the hydrocarbon sector. Inflation decreased to 2.4% in 2023 compared to 4.9% in 2022, partly due to tight monetary policies pursued by the Bank of Central African States (BEAC), the agreement to import food from Serbia, and the reduction of some import tariffs.
The report underscores the need to design effective fiscal instruments for sustainable forestry and the country's diversification efforts.
Forests in Equatorial Guinea are estimated to cover about 87% of its territory and play a vital role as an essential ecosystem. However, the country's deforestation and forest degradation rates have increased in recent years. The share of the forestry sector to GDP has declined substantially since the 1990s, partly due to the country's lack of ability to process wood products locally. Equatorial Guinea's economy, once dependent on agriculture and timber, is now heavily reliant on the hydrocarbon sector. At present, the forestry sector, including commercial logging and wood industrial processing, does not fully realize its economic potential in terms of job creation and value addition.
"Developing a sustainable commercial forestry sector that focuses on domestic value-added processing would help Equatorial Guinea meet both its economic diversification and forest preservation commitments," said Aissatou Diallo, Resident Representative for Equatorial Guinea.
Equatorial Guinea's commitment to sustainable development, including through the country's national sustainable development plan (AGENDA 2035) and the adoption of a national Reduce Carbon Emissions from Deforestation and Degradation (REDD+) plan, will require both strengthening domestic revenue mobilization and scaling-up external financing. While recent years have seen an increase in international funding for sustainable forest management in the Congo Basin region, international commitments remain insufficient.
The report identifies a set of solutions to address the multifaceted challenges facing Equatorial Guinea's forestry sector, focusing on both fiscal reforms and measures for the long-term sustainability of forest management and conservation:
- Design effective fiscal instruments: By adjusting forest tax rates based on timber production methods, encouraging forest certification, and adopting long-term forest management plans.
- Improve forest governance: Increase transparency and traceability of forest products, and build a robust commercial wood-processing industry that contributes to sustainable forestry management, increased forest revenue, job creation, and inclusive economic participation.
- Increase financial and technical support from the international community: To preserve forests and promote them as an important ecosystem in the Congo Basin and vital global public good.
"Fiscal policies that support forest preservation and the sustainable use of forest resources, combined with improved forest governance and investment climate, will not only help to improve domestic revenue mobilization, but could also help attract more financing, including international and private amid a shrinking fiscal space in Equatorial Guinea," said Djeneba Doumbia, Country Economist for Equatorial Guinea.
Download the Economic Update for Equatorial Guinea in English.
