Congo, The Democratic Republic Of The
major macro economic indicators
|2014||2015||2016 (f)||2017 (f)|
|GDP growth (%)||9.5||6.9||3.9||4.2|
|Inflation (yearly average) (%)||1.2||1.0||3.5||8.6|
|Budget balance (% GDP)||1.3||-0.1||-1.9||2.8|
|Current account balance (% GDP)||-10.1||-10.8||-10.6||-8.2|
|Public debt (% GDP)||16.8||18.9||20.0||22.6|
(e) Estimate (f) Forecast
- Abundant mineral resources (copper, cobalt, diamonds, gold, tin)
- Considerable hydroelectric potential
- International effort to solve conflicts in the Great Lakes region
- Debt relief as part of the HIPC and MDR initiatives
- Sporadic tensions in the east of the country with repeated rebellions
- Political crisis following the Supreme Court decision to postpone presidential elections
- Weak infrastructure (transport, energy, telecommunications) and failures of governance
- High poverty levels
- Lack of foreign exchange reserves (approximately 1 month of imports)
Faster growth hamstrung by political risk
In 2016, on balance, the country suffered from the fall in the prices of exported raw materials, chiefly copper prices. Nonetheless, the economy demonstrated a degree of macroeconomic stability despite the unfavourable external environment. In 2017, growth should pick up slightly, driven in particular by an increase in copper production and a recovery in mining output prices. The government's diversification efforts in 2016 in the context of the National Strategic Development Plan (NSDP), which is being drawn up, should also help shore up the sectors that made the DRC more resilient than other mining countries on the continent, namely agriculture, telecommunications and transport. However, the increased risk of political instability following President Kabila's decision to stay in power might increase foreign investors' risk aversion. Private consumption, strong in 2016, might also suffer as a result of political instability.
In 2017, private consumption is expected to boost inflation. The latteris predicted to rise, as the Congolese franc loses value. Under pressure, the currency lost more than 20% of its value against the dollar in 2016. After raising its key interest rate by 500 basis points in August 2016, the Congolese Central Bank might tighten monetary policy still further in 2017 to ward off inflation.
Copper drives an improvement in the budget and current account balance
The budget balance should return to surplus in 2017. Tax receipts look set to rise on the back of improved mining output prices in particular. However, the contribution made by external grants might fall considerably if foreign partners impose sanctions on the country as a result of J. Kabila's decision to keep power after his term expired. The government plans to reduce spending by around 14% in 2017 on top of the cuts already imposed in 2016. Nonetheless, additional resources could be directed at containing the social unrest triggered by J. Kabila's decision. Public debt, much reduced thanks to debt relief by its international creditors in 2010, remains sustainable.
Despite the growth in exports of mining products, the current account deficit will probably remain large in 2017. The high deficit in the services and income accounts accounted for by foreign-owned companies' repatriation of profits will likely keep the current account balance in negative territory. However, the trade surplus should grow thanks to the increase in copper production and, more broadly, strong gold and cobalt exports. The current account deficit should thus fall in 2017.
The postponement of presidential elections is prolonging and aggravating political uncertainty
The Supreme Court's decision to postpone presidential elections initially planned for December 2016 until April 2018 has allowed President Joseph Kabila, after several failed attempts to stay in post, to keep his grip on power. After two consecutive five-year terms, this decision signals a setback for the country's first political transition since the Constitution came into force in 2006. By following the example of other Sub-Saharan African leaders in dodging constitutional constraints at the end of their terms, Joseph Kabila has inflamed public anger. The wave of protests against President Kabila (which began in 2014) have been violently suppressed and opposition activists have been imprisoned. The protests on 19 September led to 53 deaths, according to the UN. Nevertheless, the fragmented opposition does not seem ready to lead the country out of the political crisis. Political uncertainty, corruption and poor governance are contributing to a very difficult business climate (184th out of 190 countries in the2017 Doing Business survey).
In geopolitical terms, the country has emerged from several decades of armed conflict with an improved security situation following the defeat of the rebel M23 movement in 2013. The situation remains fragile because of the residual activities of armed groups in the east of the country. In this context, diplomatic relations and security cooperation have been stepped up with Rwanda and Uganda. For the time being, the countries of the International Conference on the Great Lakes Region (ICGLR) are handling their relations with the DRC and with President Kabila carefully, despite the deterioration in the domestic situation since 2014.
Last update: January 2017