Economic Analysis
Congo

Congo

Population 4.5 million
GDP per capita 2,618 $US
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Country risk assessment
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Synthesis

major macro economic indicators

  2017 2018 2019 (e) 2020 (f)
GDP growth (%) -1.8 1.6 2.4 3.0
Inflation (yearly average, %) 0.5 1.2 1.5 1.8
Budget balance (% GDP) -7.4 6.3 7.5 7.6
Current account balance (% GDP) -5.9 6.7 6.8 7.0
Public debt (% GDP) 117.5 87.8 81.7 76.6

 

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

STRENGTHS

  • Abundant natural resources (oil, iron ore, wood) and agricultural potential
  • Potential for economic diversification with the opening of free trade zones
  • Support from international donors

WEAKNESSES

  • Highly dependent on oil
  • Lack of infrastructure
  • Insufficient progress in poverty reduction despite oil wealth
  • Unsupportive business environment: poor governance, corruption and embezzlement of public funds
  • High level of debt

Risk assessment

Oil production drives growth

Congolese growth accelerated significantly in 2019, mainly thanks to a surge in oil production (more than 60% of GDP, making the country the third-largest producer in sub-Saharan Africa), but also to a positive contribution from the non-oil sector. This momentum should continue in 2020. Oil GDP will keep growing, despite continued low oil prices. The increase in production is being driven in particular by the ramp-up of the Nene Marine (operated by Eni) and Moho-nord (Total) offshore fields. In addition, the government recently issued a new call for tenders for exploration licenses on 18 new blocks to attract new investment in the sector. Elsewhere in the economy, some sectors are showing encouraging signs and enhancing diversification prospects. The mining industry is beginning to develop, mainly around iron mining. The Mayoko mine (operated by Sapro), for example, is expected to expand production in 2020, while several other projects are in the pipeline for 2020/2022. In addition, the construction of a railway line between Mayoko and the port of Pointe-Noire, financed by Sapro, is scheduled to start in 2020 with a view to facilitating iron ore exports. Public investment could increase slightly, particularly in transport infrastructure. The conclusion of the agreement with the IMF will boost official development assistance, mainly from the AfDB and AFD, with new projects starting in 2020, such as the road and rail bridge between Brazzaville and Kinshasa, and the new fishing port at Pointe-Noire. Forestry will also contribute to growth. Inflation will remain moderate, staying below the 3% target set by the Bank of Central African States.

 

Staying on the path of debt reduction

In 2020, fiscal policy will remain cautious, generating a large government surplus, which is expected to remain stable. Revenues will continue to increase, particularly thanks to non-oil revenues, which are benefiting from recent progress in this part of the economy. A privatisation strategy is also being considered, involving various structures, including two commercial banks and an industrial complex. At the same time, spending is set to rise slightly to finance the increase in infrastructure investment and social assistance. For example, the Lisungi programme implemented jointly with the World Bank, which provides cash transfers to low-income households and improves their access to education and healthcare, will be strengthened. Continued fiscal restraint will also make it possible to stay on a path of debt reduction, even if this trajectory remains highly vulnerable to changes in oil prices and production. However, both the debt rescheduling agreement with China in May 2019 and the approval of a 3-year USD 448.6 million Extended Credit Facility programme by the IMF in July 2019 could provide support for the objective of restoring public finance sustainability. Congo still has to negotiate the restructuring of the significant debt owed to Glencore and Trafigura, two Swiss trading companies. This is one of the elements that postponed the disbursement of the second tranche of the IMF loan, originally scheduled for January 2020. Public debt service, albeit declining, remains very high (around 14% of GDP in 2020) and continues to squeeze Congo’s fiscal capacity.

The jump in oil exports, which account for about 85% of exports, has led to a current account surplus, which should be maintained in 2020. However, while oil exports are fuelling the trade surplus (more than 40% of GDP), the surplus is greatly curtailed by imports of services and the repatriation of profits connected with mining activities. In addition, the current account surplus could be jeopardized in the medium term by the gradual decline in Congolese oil production.

 

No change in sight for the 2021 elections

President Denis Sassou-Nguesso, who is 76 years old and has been in power since 1997, emerged as the clear winner of the 2016 presidential elections after a controversial constitutional reform in 2015. His Congolese Labour Party continues to hold a majority in the National Assembly as the opposition remains fragmented, despite talks aimed at building unity with a view to the 2021 elections. The recent improvement in the economic situation could partially temper popular discontent, which is fuelled by persistent poverty (37% of the population lives on less than USD 1.9 a day) and frequent corruption scandals. In August 2019, fresh revelations involved President Sassou-Nguesso’s family, including his son, who was accused of embezzlement of public funds and corruption. Nevertheless, the outgoing President looks likely to run in the elections and to win a 4th consecutive term.

The country’s business environment remains very challenging, as evidenced by its 180th place out of 190 countries in the World Bank›s Doing Business ranking. Congo suffers from serious governance deficiencies, particularly in the fight against corruption, the force of law, and the government›s capacity to reform.

 

Last update : Février 2020

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