Mineral-Rich Countries and Dutch Disease : Understanding the Macroeconomic Implications of Windfalls and the Development Prospects, The Case of Equatorial Guinea
Referring to the original context of Dutch Disease, the term refers to the fears of de-industrialization that gripped the Netherlands as a result of the appreciation of the Dutch currency that followed the discovery of natural gas deposits. Expansi...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/04/9362493/mineral-rich-countries-dutch-disease-understanding-macroeconomic-implications-windfalls-development-prospects-the-case-equatorial-guinea http://hdl.handle.net/10986/6747 |
| Summary: | Referring to the original context of
Dutch Disease, the term refers to the fears of
de-industrialization that gripped the Netherlands as a
result of the appreciation of the Dutch currency that
followed the discovery of natural gas deposits. Expansion of
petroleum exports in the 1960s not only crowded out other
exports, it actually reduced other exports
disproportionately and fueled the fears of dire consequences
for Dutch manufacturing. In the case of Equatorial Guinea,
the secondary sector represents about 2 percent of the gross
domestic product, manufacturing represents less than 1
percent, and oil represents more than 95 percent. The
negative impact of the Dutch Disease in this context would
be limited given the structure of the economy and on the
contrary may even be a good thing because it fuels the
structural transformational process of the economy, which is
needed in Equatorial Guinea. This paper argues that the
ongoing Dutch Disease is a natural and necessary
reallocation of resources in the economy of Equatorial
Guinea. The magnitude of negative macroeconomic consequences
of the Dutch Disease depends on the country's economic
structure and stage of development. In a country where the
manufacturing sector barely exists or where the non-oil
primary sector is structurally deficient, as has been the
case of Equatorial Guinea, there is little to fear about the
disease. The oil boom is a blessing, given that oil revenues
when properly managed can play a special and critical role
in overall economic development and poverty reduction in
low-income countries. To promote good governance in the
management of the country's oil wealth, the government
may wish to adhere to clear standards of accountability and
transparency; especially by complying with the Extractive
Industries Transparency Initiative (EITI++). |
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