Oil and gas exports have increased substantially and will drive the economy for years to come. Real GDP growth reached 23% in 1999, 18% in 2000, 66% in 2001 and 24% in 2002. Per capita income doubled from about $1,000 in 1998 to $2,000 in 2000 and $4,900 today. The energy export sector is responsible for this rapid growth. Oil production has increased from 81,000 barrels per day in 1998 to more that 350,000 bpd by 2003. Production of 500,000 bpd is projected by 2005. This is based on existing commercially viable oil and gas deposits. Exploration efforts continue in search of further potential offshore concessions.

Equatorial Guinea has other unexploited human and natural resources, including a tropical climate, fertile soils, rich expanses of water, deepwater ports, and an untapped, if unskilled, source of labor. Following independence in 1968, the country suffered under a repressive dictatorship for 11 years, which devastated the economy. The agricultural sector, which historically was known for cocoa of the highest quality, has never fully recovered. In 1969 Equatorial Guinea produced 36,161 tons of highly bid cocoa, but production dropped to 4,800 tons in 2000 and 2,700 tons in 2001. Coffee production also dropped to 100,000 metric tons in 2000. Timber is the main source of foreign exchange after oil, though it now only accounts for 3% of total export earnings. Timber production increased steadily during the 1990s; wood exports reached a record 789,000 cubic meters in 1999 as demand in Asia (mainly China) gathered pace after the 1998 economic crisis. Most of the production (mainly Okoume) goes to exports, and only 3% is processed locally. Environmentalists fear that exploitation at this level is unsustainable and point out to the permanent damage already inflicted on the forestry reserves on Bioko.

Consumer price inflation has declined from the 38.8% experienced in 1994 following the CFA franc devaluation, to 7.8% in 1998, and 1.0% in 1999, according to BEAC data. Consumer prices inflation has remained steady at 6% since 2002.

Equatorial Guinea's policies, as defined by law, comprise an open investment regime. Qualitative restrictions on imports, nontariff protection, and many import licensing requirements were lifted when in 1992 the government adopted a public investment program endorsed by the World Bank. The Government of the Republic of Equatorial Guinea has sold some state enterprises. It is attempting to create a more favorable investment climate, and its investment code contains numerous incentives for job creation, training, promotion of nontraditional exports, support of development projects and indigenous capital participation, freedom for repatriation of profits, exemption from certain taxes and capital, and other benefits. Trade regulations have been further liberalized since Central African Economic and Monetary Union (CEMAC) reform codes in 1994. This included elimination of quota restrictions and reductions in the range and amounts of tariffs. The CEMAC countries agreed to the introduction of a value added tax (VAT) in 1999.

While business laws promote a liberalized economy, the business climate remains difficult. Application of the laws remains selective. Corruption among officials is widespread, and many business deals are concluded under nontransparent circumstances. A newly introduced wage law now regulates separate wage levels for the petroleum, private and government sector.

There is little industry in the country, and the local market for industrial products is small. The government seeks to expand the role of free enterprise and to promote foreign investment but has had little success in creating an atmosphere conducive to investor interest.

The Equatoguinean budget has grown enormously in the past 5 years as royalties and taxes on foreign company oil and gas production have provided new resources to a once poor government. The 2001 budget foresaw revenues of about 154 billion CFA francs (about U.S.$200 million), up about 50% from 2000 levels. Oil revenues account for more than two-thirds of government revenue, and VAT and trade taxes are the other large revenue sources.

The Equatoguinean Government has undertaken a number of reforms since 1991 to reduce its predominant role in the economy and promote private sector development. Its role is a diminishing one, although many government interactions with the private sector are at times capricious. The government is anxious for greater U.S. investment. Beginning in early 1997, the government initiated efforts to attract significant private sector involvement through cooperative efforts with the Corporate Council on Africa visit and numerous ministerial efforts. In 1998, the government privatized distribution of petroleum products. There are now Total and Mobil stations in the country. The government has expressed interest in privatizing the outmoded electricity utility. A French company operates cellular telephone service in cooperation with a state enterprise. Agriculture, fishing, livestock, and tourism are among sectors the government would like targeted.

Equatorial Guinea's balance-of-payments situation has improved substantially since the mid-1990s because of new oil and gas production and favorable world energy prices. Exports totaled $2.45 billion in 2002. Crude oil exports now annually accounted for more than 90% of export earnings. Timber exports, by contrast, now represent only about 3% of export revenues. Imports into Equatorial Guinea also are growing very quickly. Imports totaled U.S. $260 million.

Equatorial Guinea in the 1980s and 1990s received foreign assistance from numerous bilateral and multilateral donors, including European countries, the United States, and the World Bank. Many of these aid programs have ceased altogether or have diminished. Spain, France, and the European Union continue to provide some project assistance, as do China and Cuba. The government also has discussed working with World Bank assistance to develop government administrative capacity.

Equatorial Guinea operated under an International Monetary Fund-negotiated Enhanced Structural Adjustment Facility (ESAF) until 1996. Since then, there have been no formal agreements or arrangements. Since 1996, the IMF has held regular held Article IV consultations (periodic country evaluations) . After the 1999 consultations, IMF directors stressed the need for Equatorial Guinea to establish greater fiscal discipline, accountability, and more transparent management of public sector resources, especially energy sector revenue. IMF officials also have emphasized the need for economic data. Since 1999, the EquatoguineanGovernment has attempted to meet IMFrequests for transparency and openness in its treasury accounts.

Infrastructure
Infrastructure is generally old and in poor condition. Surface transport options are increasing as the government has invested heavily in road pavement projects. The African Development Bank is helping to improve the paved roads from Malabo to Luba and Riaba; the Chinese are undertaking a project to link Mongomo to Bata on the mainland, and the European Union is financing an inter-states road network linking Equatorial Guinea to Cameroon and Gabon. Road maintenance is often inadequate.

Electricity is available in Equatorial Guinea's larger towns thanks to three small overworked hydropower facilities and a number of aged generators. In 1999, national production was about 13,000 KwH. In Malabo, the American company, Marathon Oil, built a 10 mega-watts electricity plant financed by the government, which came in line in mid-2000, and plans to double capacity are advancing. This plant provides improved service to the capital, although there are still occasional outages. On the mainland the largest city, Bata, still has regular blackouts.

Water is only available in the major towns and is not always reliable because of poor maintenance and mismanagement. Some villages and rural areas are equipped with generators and water pumps, usually owned by private individuals.

Parastatal Getesa, a joint venture with a minority ownership stake held by a French subsidiary of France Telecom, provides telephone service in the major cities. The land-based system is overextended, but Getesa has introduced a popular GSM system, which is generally reliable in Malabo and Bata.

Equatorial Guinea has two of the deepest Atlantic seaports of the region, including the main business and commercial port city of Bata. The ports of both Malabo and Bata are severely overextended and require extensive rehabilitation and reconditioning. In partnership with U.S. petroleum company Amerada Hess, British company, Incat, has made significant progress in a project to renovate and expand Luba, the country's third-largest port, located on Bioko Island. The government hopes Luba will become a major transportation hub for offshore oil and gas companies operating in the Gulf of Guinea. Luba is located some 50 kilometers from Malabo and was previously virtually inactive except for minor fishing activities and occasional use to ease congestion in Malabo. Riaba is the other port of any scale on Bioko but is less active. The continental ports of Mbini and Cogo have deteriorated as well and are now used primarily for timber activities.

Five small airlines now offer regular daily services between the two cities of Malabo and Bata and nearby neighboring countries. A few aging Soviet-built aircraft operated by several small carriers (one state-owned, the others private,) constitute this national aircraft fleet. The influx of oil workers have increased international air activity. Major international carriers now connect Malabo to Amsterdam, Madrid and Zurich in Europe. A weekly business-class charter flight provides service to Houston, Texas. The runway at Malabo's international airport (3,200 meters) is equipped with lights and can service equipment similar to DC 10s and Cl3Os. The one at Bata (2,400 meters) does not operate at night but can accommodate aircraft as large as B737s. Two minor airstrips (800 meters) are located at Mongomo and on the island of Annobon.

Energy Developments
After a slow start, Equatorial Guinea has recently emerged as Africa's third largest major oil producer with its location in one of the most promising hydrocarbon regions in the world. The main oil fields, Zafiro and Alba, are both located offshore of Bioko island. Daily production now exceeds 350,000 bpd.

In 1995 Mobil (now ExxonMobil) discovered the large Zafiro field, with estimated reserves of 400m barrels. Production began in 1996. The company announced a 3-year U.S.$1bn rapid development program to boost output to 130,000 b/d by early 2001. Progress was delayed due to a contractual dispute with the government and by unexpectedly difficult geology. The difference with the government was eventually resolved.

In 1998 a more liberal regulatory and profit-sharing arrangement for hydrocarbon exploration and production activities was introduced. It revised and updated the production-sharing contract, which, until then, had favored Western operators heavily. As a result domestic oil receipt rose from 13% to 20% of oil export revenue. However, the government's share remains relatively poor by international standards.

In 1997 CMS Nomeco (now Marathon Oil) moved to expand its operation with a U.S.$300m methanol plant. The plant entered production in 2000 and help boost condensate output from Alba field.

In August 1999 the government closed bidding on a new petroleum-licensing round for 53 unexplored deepwater blocks and seven shallow water blocks. The response was small due to a combination of factors, including falling oil prices, restructuring within the oil industry, and uncertainty over and undemarcated maritime border with Nigeria (resolved by 2000).

In late 1999 Triton Energy, (now part of Amerada Hess), discovered La Ceiba in block G in an entirely new area offshore the mainland of the country. Triton expects a U.S.$200m development program to enable La Ceiba and associated fields to produce 100,000 b/d by late 2001, despite disappointments and technical problems at the beginning of the year.

With an upturn in oil prices, exploration intensified in 2000. In April 2000 U.S.-based Vanco Energy signed a production-sharing contract for the offshore block of Corisco Deep. In May 2000, Chevron was granted block L, offshore Rio Muni, and a further three production-sharing contracts (for blocks J, I, and H) were signed with Atlas petroleum, a Nigerian company.

In early 2001 the government announced plans to establish a national oil company, GEPetrol, to allow Equatorial Guinea to take a greater stake in the sector and to facilitate the more rapid transfer of skills. However, critics fear that such a company may become a vehicle for opaque accounting and inertia of the sort that has hindered development in neighboring countries including Angola, Cameroon, and Nigeria.

Further explorations in the Corisco Bay area (bordering Gabon) and near the maritime boundary with Cameroon could be complicated by minor border disputes between Equatorial Guinea and its two neighbors. Though these disputes remain unresolved, all three countries have proved willing to settle their differences via diplomatic means, including the execution of agreements on joint exploratory efforts.