Economic studies
Congo, The Democratic Republic Of The

Congo, The Democratic Republic Of The

Population 97.9 million
GDP per capita 509 US$
D
Country risk assessment
E
Business Climate
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 5.8 4.4 -1.7 2.1
Inflation (yearly average, %) 29.3 4.7 16.3 14.0
Budget balance (% GDP) 0.1 -0.7 -2.1 -1.5
Current account balance (% GDP) -3.6 -3.8 -4.8 -4.1
Public debt (% GDP) 15.3 14.8 16.1 13.4

(e): Estimate (f): Forecast

STRENGTHS

  • Abundant mineral resources (copper, cobalt, diamond, gold, tin etc.)
  • Significant hydroelectric potential
  • International involvement and regional cooperation in resolving conflicts in the Great Lakes region

WEAKNESSES

  • Weak infrastructure (transport, energy, telecommunications)
  • Poor security and humanitarian situation, with numerous armed militias in the east of the country
  • Risk of a resurgence of an epidemic of the Ebola virus disease
  • Extremely dependent on commodity prices
  • Poor governance, questionable electoral process

RISK ASSESSMENT

The mining sector is the main benchmark for the recovery

In 2020, measures aimed at limiting the spread of COVID-19 pushed the economy into recession. In 2021, activity, although still limited, is expected to return to growth. It will be supported by increased mining exports (about 17% of GDP). Shaken by the post-pandemic crisis, international metal prices should overall be more favourable, while production volumes should increase. The production of copper and cobalt (over 85% of exports in 2019), which, despite the crisis, increased in 2020, is expected to strengthen. The Kamoa-Kakula project, which should come into production in the summer of 2021, will notably boost copper production. Despite a difficult business environment (insecurity, epidemics, weak infrastructure, unpredictable operating environment, illegal mining), the opportunities presented by this sector should continue to attract private foreign investment. Domestic investment, on the other hand, should suffer from the rise in the key interest rate from 7.5% to 18.5% in August 2020. Moreover, if the favourable outlook for the mining sector (14% of budget revenues) is confirmed, it should support government spending. Nevertheless, the authorities may be forced to exercise restraint in public spending as the deficit widened in 2020. Household consumption will contribute to growth, benefiting from the easing of restrictions to limit the spread of COVID-19 and the recovery in the agricultural sector (about 65% of formal employment). Nevertheless, with nearly 75% of the population living below the international poverty line, its contribution will be limited. Moreover, these low incomes are expected to continue to be put under pressure by high inflation, despite a likely decline in 2021 thanks to a relative stabilisation of the Congolese franc.

 

Public and external accounts all the more vulnerable as a result of the pandemic

In 2020, low revenue mobilisation and expenditures to respond to the COVID-19 crisis have widened the budget deficit. In 2021, it is expected to narrow thanks to improved revenue collection. Nevertheless, the balance is expected to remain in deficit in view of relatively high expenditures. These will be dominated by the wage bill, which will absorb 57% of the projected revenues according to the initial 2021 budget law. The execution of capital expenditure will depend heavily on donor funding. The low level of public debt limits the risk of over-indebtedness, but the associated servicing costs could quickly become unsustainable given the low tax burden (around 8% of GDP). Benefiting from the G20 debt service suspension initiative, this risk nevertheless seems to be contained in the short term.

 

In 2021, the current account deficit is expected to narrow, notably owing to a rebound in mineral exports. It should allow for a return to a surplus in the balance of goods. Nevertheless, it will be largely offset by imports of services in this sector, which will fuel a deficit in the services account. Furthermore, repatriation of profits by companies, mainly foreign mining operators established in the DRC, should widen the income deficit. By contrast, the positive balance of the transfers account should grow, to the benefit of an increase in current international cooperation. While the current account deficit should continue to maintain downward pressure on the Congolese franc, which has lost more than 15% of its value in 2020, its financing by FDI in mining projects and concessional external loans should help to slow the depreciation. With foreign exchange reserves at a critical level (less than one month of import cover), the country's external position remains exposed to a commodity price shock. After benefiting from an IMF Rapid Credit Facility in 2020 to address the impact of the pandemic on the terms of trade, the country's authorities have initiated negotiations to conclude a three-year agreement with the Bretton Woods institution.

 

Growing political divisions in a precarious security and humanitarian climate

In December 2018, after two years of postponing the general elections, and after an electoral process whose integrity was questioned by many observers, including the influential Catholic Church, Felix Tshisekedi was declared winner of the presidential election, marking the end of nearly 18 years as head of state for Joseph Kabila. The latter nevertheless remains a key figure on the political scene, notably retaining influence in Parliament, where his party, the Common Front for Congo (FCC), has retained a majority in both chambers. Nevertheless, the coalition agreement between the FCC and the president's party, Cap for Change (CACH), did not withstand the divisions, particularly over the nominations to the Electoral Commission, between pro-Tshisekedi and pro-Kabila. In December 2020, Felix Tshisekedi thus ended the power-sharing agreement with his predecessor and said he would seek to build a new coalition. These political struggles could precipitate legislative elections in 2021, which would be held in a precarious social climate. In 2020, restrictions aimed at containing the spread of the COVID-19 pandemic have also fuelled social demands, in addition to those relating to the prevalence of poverty, corruption, weak governance and insecurity. Despite cooperation efforts with neighbours in the Great Lakes region, armed militia activity in the east of the country (South Kivu, North Kivu, Ituri) remains strong, fuelling a humanitarian crisis aggravated by outbreaks of Ebola disease. Although the 10th and 11th epidemics officially ended in 2020, the risk of resurgence remains high. Social, political, security and humanitarian instability contributes to a highly constraining business climate.

 

Last updated: March 2021

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