Economic Analysis
Congo, The Democratic Republic Of The

Congo, The Democratic Republic Of The

Population 86.7 million
GDP per capita 478 US$
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Synthesis

major macro economic indicators

  2016 2017 2018 (e) 2019 (f)
GDP growth (%) 2.4 3.7 3.8 4.1
Inflation (yearly average. %) 5.9 40.8 23.2 13.5
Budget balance (% GDP) -0.9 0.4 -0.2 -0.4
Current account balance (% GDP) -3.6 -3.1 -3.0 -2.8
Public debt (% GDP) 19.3 18.2 20.9 22.1

 

(e): Estimate. (f): Forecast.

STRENGTHS

  • Abundant mineral resources (copper, cobalt, diamond, gold, tin)
  • Significant hydroelectric potential
  • International involvement and regional cooperation in resolving conflicts in the Great Lakes region
  • Debt relief under the HIPC and MDR initiatives

WEAKNESSES

  • Poor governance and high political fragility
  • Weak infrastructure (transport, energy, telecommunications)
  • Poor security and humanitarian situation, particularly in the east of the country, where there are many armed groups
  • Resurgence of Ebola outbreaks in the East since August 2018
  • Extremely dependent on commodity prices
  • High level of poverty

RISK ASSESSMENT

The mining sector masks weakness in domestic demand

Growth is expected to continue to increase in 2019, mainly driven by the mining sector. Ore exports, particularly copper, should continue to grow, in line with production trends. The mining sector should also continue to attract private investment, although implementation of a new mining code, which is of concern to firms in the sector, could dampen investments. Among other things, the new code increases taxes and royalties, requires at least 10% of mining companies’ capital to be held by Congolese citizens, and prohibits, unless otherwise agreed, the export of unprocessed minerals under new mining permits. Thanks to the increase in mining revenues, but also thanks to external financing under the National Strategic Development Plan, public investment, particularly in infrastructure development, should also increase. The deterioration of the security situation in the country following the elections could, however, have an impact on external financing. The contribution from private consumption is expected to remain sluggish due to the many domestic conflicts, the Ebola outbreak in the east, and persistently high inflation, in a country where nearly 75% of people live in poverty.

A fragile external position

The public balance, which was expected to show a slight surplus in 2019, could be affected by the budget overruns observed in the first half of the year, particularly those concerning the state's operating expenses. Still largely dominated by a heavy wage bill, public spending is also set to increase in security, health (Ebola containment), and infrastructure. The increase in taxes and royalties in the mining sector (about 30% of total revenues) should nevertheless make it possible to partially absorb these increases in expenditure. As debt is still at a low level and largely concessional, the risk of over-indebtedness remains limited.
The current account is expected to remain in deficit, pulled down by the services and income balances, which remain in deficit owing to mining services and profit repatriation respectively. The current account deficit is expected to narrow slightly, supported by the increase in the trade surplus, thanks to mining exports, and with import growth limited by weak domestic demand. FDI, which is mainly directed towards the mining sector, finances the deficit, but remains exposed to any deterioration in the security and political situation, or to a drop in commodities prices. Foreign exchange reserves, which represent just over a month of imports, would be insufficient to prevent a sharp depreciation of the Congolese franc.

Political, security and humanitarian situation remains critical following elections

After two years and a week of heated postponements following Joseph Kabila's (in power since 2001) refusal to resign from the presidency at the end of his second and constitutionally final term, the presidential, legislative, and provincial elections were finally held on December 30, 2018. Félix Tshisekedi was elected as President ahead of Martin Fayulu and Emmanuel Ramazani Shadary, the latter who was designated as heir apparent by Mr Kabila. The elections were marked by numerous dysfunctions, and suffered from strong protests by Martin Fayulu and some observers who called him the winner, including the Catholic Church. In addition, outgoing President Kabila remains an unavoidable political actor since the coalition around his party has retained an absolute majority in the National Assembly and the Senate. Therefore, President Tshisekedi must work with a Prime Minister coming from the parliamentary majority. Members of the pro-Kabila coalition will dominate the government, which is still the focus of negotiations in July 2019. With an already critical security and humanitarian context in some parts of the territory, this chaotic electoral process has led to increased instability and an outbreak of violence. Facing a national army unable to restore order, the many armed groups are continuing their exactions, in particular along the borders with Burundi, Rwanda, and Uganda in the East (South Kivu, North Kivu and Ituri provinces), despite the UN mission in charge of the protection of civilians (MONUSCO). These groups finance themselves mainly through looting and illegal mining. Already fragile due to violence and population displacements, these regions are also affected by the Ebola virus, which was responsible for more than 1750 deaths between August 2018 and July 2019, and is difficult to contain. Furthermore, the situation in Kasai, where the Kamwina Nsapu insurgency against the central government had plunged the region into violence in 2016 and 2017, could flare up again. These many sources of political and security instability – along with corruption, weak governance and poor infrastructure – contribute to the country's extremely deteriorated business climate (184th out of 190 countries in the Doing Business 2019 ranking).

 

 

Last update: July 2019

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