Republic of Equatorial Guinea: Selected Issues

Author: International Monetary Fund. African Dept.

Volume/Issue: Volume 2016 Issue 358

Publication date: November 2016

ISBN: 9781475555981

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Topics covered in this book

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Banks and Banking , Finance , Economics- Macroeconomics , Money and Monetary Policy , ISCR , CR , bank , banking sector , price , CEMAC , economic activity , asset quality , oil-price shock , Equatorial Guinea banking sector , risk profile , lending portfolio , bank-borrower relationship , capitalized bank , bank linkage , Oil prices , Financial sector development , Credit , Commercial banks , Financial sector stability , Sub-Saharan Africa , Africa , Global

Also of interest

Republic of Congo : 2001 Article IV

Spain

Peru

Malawi

Summary

This Selected Issues paper analyzes macrofinancial linkages in Equatorial Guinea. Insufficient fiscal consolidation in response to falling oil prices and production has translated into arrears accumulation, leading to a sharp deterioration in commercial banks’ balance sheets. Although banks’ capital and liquidity ratio appear adequate, profitability has been shrinking, owing to weak economic activity and decelerating credit supply. Moreover, recent stress tests reveal a high sensitivity to negative liquidity and asset quality shocks. Financial development remains lackluster, which hurts economic development and effective structural transformation. Finally, strong macrofinancial linkages compounded by regional subsidiary-parent interlinkages call for increased scrutiny.