Economic studies
Congo, The Democratic Republic Of The

Congo, The Democratic Republic Of The

Population 86.7 million
GDP 478 US$
D
Country risk assessment
E
Business Climate
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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 0.3
Current account balance (% GDP) -3.6 -3.1 -3.0 -2.8
Public debt (% GDP) 19.3 18.2 20.9 19.9

 

(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 re-gion
  • Debt relief under the HIPC and MDR initiatives

WEAKNESSES

  • Tensions in the east of the country, where there are many armed groups, including Forces Dé-mocratiques de Libération du Rwanda, Allied Democratic Forces and the Mai-Mai militia
  • Precarious humanitarian situation in the Kasai region, leading to tensions with Angola
  • Unsolved political crisis since the Supreme Court’s decision to postpone the 2016 presidential elections
  • Extremely dependent on commodity prices
  • Weak infrastructure (transport, energy, telecommunications)
  • Poor governance and weak institutions
  • 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 and cobalt, should continue to grow, in line with production trends. However, the temporary closure of the Kamoto mine, due to problems with uranium content in the cobalt hydroxide produced by the facility, will likely limit production gains in 2019. At the same time, the shut-down should support cobalt prices, which have fallen from a record high in March 2018. 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. A severe deterioration in the political and 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 conflicts, the Ebola epidemic in the east, and persistently high inflation, in a country where nearly 75% of people live in poverty.

A fragile external position

After being burdened by the organisation of elections in 2018, the budget balance is expected to return to a small surplus in 2019. Still largely dominated by a heavy wage bill, spending is set to increase, particularly in security, health (to contain Ebola), and infrastructure. The increase in taxes and royalties in the mining sector (about 30% of total revenues) should nevertheless make it possible to absorb this increase 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.

A critical political, security and humanitarian situation

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 last term, the presidential, legislative, and provincial elections were finally held on December 30, 2018. Marked by numerous dysfunctions and the postponement of the vote in some constituencies (Béni, Butombo and Yumbi), the results of the election – supposed to be the first peaceful transfer of power since the country’s independence (1960) – have yet to be delivered at the time of writing. Emmanuel Ramazani Shadary, designated as heir apparent by Mr Kabila (who does not intend to withdraw from political life and could run again in 2023), and opponents Martin Fayulu and Félix Tshisekedi have all declared themselves winners. Given that UN assistance and certain international observers were rejected prior to the vote, the electoral commission is already accused of favouring Mr Shadary. Suspicions of fraud were reinforced by the authority’s decision to cut off the internet after the vote. In an already critical security and humanitarian context in some parts of the territory, this chaotic electoral process could increase fears of a period of instability and an outbreak of violence, particularly if Mr Shadary is announced as victor. 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. In addition, the many armed groups in the eastern part of the country (Kivu) are continuing their exactions. Already fragile due to violence and population displacements, these regions are also affected by the Ebola virus, which has been responsible for more than 300 deaths, and is difficult to contain due to the aforementioned conflicts. Despite the work of the UN Mission for the Protection of Civilians (MONUSCO), conflicts continue to displace people. The many conflicts in the border areas are also generating regular tensions with its neighbours, particularly Angola, Rwanda, and Uganda. 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: February 2019

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