Africa Market Update -December 2014

MARKET UPDATE – AFRICA | November 2014
Growth must be
fast and robust
enough to ensure
the country is
not caught in
macroeconomic
vulnerabilities
such as
accumulation of
debt as it seeks to
meet expenditure
amidst dwindling
oil revenue.
Gabon’s New Engines of Growth (%
of GDP)
FISCAL BALANCE
OUTLOOK
The economy is headed for deficit in its
2014 fiscal balance driven by the trend in oil
prices. With the country’s fiscal break-even
point estimated at USD 100.0 per barrel 13 ,
prospects of a deteriorating fiscal position
are heightening with the OPEC Basket price
slipping further below the USD 100.0 psychological
mark. In this scheme of events,
either of two possibilities is bound to ensue
in the near term: One, the government
could increase its appetite for domestic borrowing
to meet funding gaps, thereby pushing
interest rates upwards. Two, we could
witness a slowdown in public sector investment
as focus is channelled towards priority
spending.
Source: AfDB, OECD, UNDP, StratLink Africa
The emergence of new pockets of growth in
the last five years helps Gabon mitigate fiscal
vulnerabilities associated with declining
oil production and volatile global prices.
OPEC Basket vs Fiscal Break-even
Price
Gabon Oil Production (‘000 Barrels/Day)
Source: Bloomberg, StratLink Africa
Source: Bloomberg, StratLink Africa
We foresee the first option being the more
likely outcome since the second would have
the net effect of slowing the economy’s
growth momentum further. The government
intends to borrow between USD 189.5
million and USD 208.5 million from the domestic
market by the end of Q42014 in what
could be a clear indication of efforts to meet
emerging funding gaps.
Growth must be fast and robust enough to
ensure the country is not caught in macroeconomic
vulnerabilities such as accumulation
of debt as it seeks to meet expenditure
13 Fitch Credit Rating June 2014
28 | StratLink Africa Ltd.
www.stratlinkglobal.com