Good news for Gabon. Fitch Ratings has just upgraded the country’s rating from CCC to B- with a stable outlook. The upgrade reflects a recent easing of liquidity pressures due to rising oil prices and a new IMF program.
For Fitch, this upward revision also reflects his expectation that Gabon’s underlying fiscal position will improve due to a “rebound in non-oil revenues, a reduction in pandemic-related spending and a restriction of other current expenditure ”.
The rating also takes into account Gabon’s high GDP per capita compared to its peers but also long-term uncertainties regarding the country’s oil production capacity, recurring difficulties in obtaining external financing and poor management of public finances.
Fitch expects Gabon’s budget deficit to reach 3.3% of GDP in 2021 from 2.5% in 2020, reflecting the impact that lower oil production will have on fiscal revenues. “With the full recovery in economic activity and the reduction in spending related to Covid 19, we expect the budget deficit to narrow to 1.4% in 2022 and 0.7% in 2023, below our forecast for the ‘B’ median of 7.4%, ”says Fitch.
In addition, the agency forecasts a contraction in oil production of 14% and an average of 185,000 barrels per day in 2021 (in relation to OPEC quotas), after a modest contraction of 1.2% in 2020. Production is expected to gradually recover to 210,000 barrels per day by 2023, but the expected moderation in Brent oil prices to $ 53 / bbl by 2023 will result in continued reduction in oil revenues.
In his report, Fitch also highlights the uncertainty over the country’s oil potential with aged wells and reserves located deep offshore under the mangroves. In addition, investment has been hampered by questions about the ability of oil operators to continue to hold foreign currency accounts. Gabon’s 12th oil tender has opened since 2018 but suffered multiple delays, despite the revision of the oil law in 2019.
