Equatorial Guinea confronts a defining economic transition as IMF forecasts prolonged contraction

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Declining oil production is pushing one of Africa’s richest hydrocarbon economies into a critical period of economic adjustment, testing diversification efforts and fiscal resilience.

MALABO — While much of Sub-Saharan Africa is projected to maintain growth above 4% over the next three years, Equatorial Guinea is moving in the opposite direction. According to the latest International Monetary Fund projections, the country’s economy is expected to contract by 6.4% in 2025, 2.7% in 2026 and 1.3% in 2027, making it one of the weakest-performing economies in the region. Sub-Saharan Africa as a whole is forecast to grow 4.5% in 2025, 4.3% in 2026 and 4.4% in 2027.

The figures highlight a structural challenge confronting the Central African nation: the gradual decline of hydrocarbon production that has underpinned economic activity for more than two decades. IMF assessments indicate that crude oil and gas output continue to fall as mature fields yield less production, reducing export earnings, fiscal revenues and overall economic activity. In 2025 alone, hydrocarbon production is projected to decline by 16.8%, contributing significantly to the expected economic contraction.

For a country where hydrocarbons have historically dominated exports, government revenues and foreign investment flows, the implications extend well beyond headline GDP figures. The challenge facing policymakers is increasingly clear: how to build a sustainable post-oil growth model before declining production erodes the economic gains accumulated over previous decades.

The end of the hydrocarbon growth cycle

Equatorial Guinea’s economic transformation was one of Africa’s most dramatic. Offshore oil discoveries turned a relatively small economy into one of the continent’s highest-income countries on a per-capita basis.

That model is now under pressure.

The IMF expects economic activity to continue shrinking over the medium term as hydrocarbon production declines faster than new sectors can compensate. Unlike temporary commodity price fluctuations, declining output from mature oil fields represents a structural challenge that requires long-term economic adjustment rather than short-term policy intervention.

The country remains heavily exposed to developments in the energy sector. According to the African Development Bank, hydrocarbons account for approximately 46% of GDP and more than 90% of exports, illustrating the scale of the dependence that policymakers are seeking to reduce.

Fiscal pressures are increasing

The economic slowdown is expected to place additional strain on public finances.

According to the World Bank, declining oil production and weaker export revenues are likely to worsen both fiscal and external balances over the coming years. Lower hydrocarbon revenues mean fewer resources available for public investment, infrastructure development and social programmes.

The IMF projects that government debt will reach approximately 39.1% of GDP in 2026, while the current account balance is expected to remain negative. Although these levels remain manageable by international standards, they reflect a gradual erosion of the fiscal buffers that previously benefited from strong oil revenues.

At the same time, authorities continue to face growing expectations to improve public services, create employment opportunities and diversify economic activity beyond the energy sector.

Diversification is no longer optional

The central economic question is whether non-oil sectors can expand quickly enough to offset declining hydrocarbon production.

The IMF notes that the non-hydrocarbon economy continues to grow, even as the broader economy contracts. In 2025, while total GDP is expected to fall sharply, the non-oil sector is projected to expand by 2.3%, supported by domestic services and other productive activities.

The World Bank believes agriculture and services could become increasingly important drivers of employment and poverty reduction. Its latest assessment suggests that labour-intensive sectors may help reduce poverty rates despite the broader economic slowdown.

However, economists caution that replacing the economic weight of hydrocarbons will require sustained investment, regulatory reforms, stronger private-sector development and greater integration into regional and global value chains.

What investors are watching

Despite the challenging outlook, Equatorial Guinea retains several strategic advantages.

The country possesses relatively modern infrastructure, significant natural gas resources, a strategic location in the Gulf of Guinea and one of the highest levels of investment relative to GDP in the region. IMF data indicate that total investment is expected to remain close to 29% of GDP in 2026, suggesting that capital formation remains an important feature of the economy.

Investors are increasingly focused on whether future capital flows can be redirected toward sectors capable of generating sustainable growth outside hydrocarbons, including agribusiness, logistics, fisheries, tourism and value-added services.

The success of that transition could determine whether Equatorial Guinea emerges from the current downturn with a more diversified economy or remains vulnerable to further declines in oil and gas production.

Beyond the numbers

The IMF forecasts are more than a warning about three years of economic contraction. They represent a broader turning point in the country’s development trajectory.

For decades, hydrocarbons provided the engine of growth. The next chapter will depend on whether Equatorial Guinea can transform its resource wealth into a diversified economic base capable of generating employment, attracting investment and sustaining long-term prosperity.

The country’s economic future may ultimately be defined not by the decline of oil production, but by the speed and effectiveness with which it builds the industries that come after it.