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Fitch downgrades Gabon's long-term rating to B

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Fitch downgrades Gabon's long-term rating to B

Fitch Ratings lowered Gabon's long-term foreign-currency issuer default rating to B from B+, with a negative outlook, citing the deteriorating fiscal position and external vulnerabilities of the oil-producing country.

The downgrade reflected Gabon's large domestic and external arrears, which stand at 2% and 7.7% of GDP, respectively. Fitch said the country's failure to clear these arrears could weaken investor confidence and access to external private financing and could weigh on economic activity and the banking sector.

Fitch said Gabon's gross general government debt rose to 64.2% of GDP in 2016 from 44.7% in 2015. The country's fiscal deficit also widened to 6.6% of GDP from 4% during the period, while the current account deficit increased to 10% of GDP from 4.3%.

The rating agency also cited Gabon's narrowing financing options, declining international reserves, potential backsliding on policy, and delay in implementing reforms.

Gabon's economy is projected to expand just 0.8% in 2017, Fitch said, down from its earlier 2.4% growth forecast due to a decline in oil production, subdued public investment and a weakened private sector.

The economy is expected to rebound with 2.7% and 3.6% growth in 2018 and 2019, respectively, supported by the non-oil sector and resumption of investments in the oil industry, Fitch said.