The combination of a small population and plentiful petroleum resources has given Gabon one of the highest incomes per capita in sub-Saharan Africa. The 1999 per capita gross domestic product (GDP) was a comfortable US$6,500. It therefore ranks as an upper middle-income country, a rarity among African nations.
Gabon's economy depended on timber and manganese until oil began to be exploited in significant quantities offshore in the early 1970s. The oil sector now accounts for 50 percent of GDP. Gabon continues to face fluctuating prices for its oil, timber, manganese, and uranium exports. The dominance of the petroleum sector is reflected in the economy's vulnerability to changes in world prices for this commodity, and the rate of economic growth has fluctuated widely in recent decades. While growth in GDP averaged 9.5 percent per year between 1965 and 1980, the average growth rate declined to 0.8 percent from 1985 to 1990 following the collapse of the petroleum prices in 1986. When the Rabikonga oil fields were developed in the 1990s, however, there was some improvement, reaching an average growth rate of 3.2 percent per year from 1990 to 1997. But due to steeply falling petroleum prices and a downturn in Asian demand for timber, the economy contracted by approximately 4 percent in 1998 and only saw a modest recovery in 1999 with an estimated 2 percent rise in GDP.
The petroleum boom of the mid-1970s and the expectation that oil prices would remain high led to government investment spending and borrowing, which left the country with a heavy debt burden. Consequently, in the mid-1980s the government had to undertake a series of economic adjustment programs designed to reduce debt while promoting the development of non-petroleum activities. Programs of privatization , rationalization, and retrenchment (cutting expenses) of public sector enterprises were undertaken.
Progress was limited in the areas under reform and the non-petroleum economy failed to expand as hoped. However, in January 1994 the government adopted a program for economic recovery supported by the International Monetary Fund (IMF). The objectives of this program were broadly achieved by the end of 1998. A number of major privatizations have taken place (the power utility and railway companies, for example), while others pending include the telecommunication services and the national airline. Some significant tax reforms have been introduced, notably the extension of the value-added tax (VAT) to forestry companies, removal of tax exemptions, and introduction of an investment code consistent with IMF recommendations.