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Democratic Republic of Congo Economic Outlook
Real GDP growth was an estimated 4.0% in 2018, up from 3.7% in 2017, due to higher commodity prices and greater mining production. The primary sector continued to be the key driver of growth, sustained by a dynamic extraction sector. Because of budget pressures on the country’s own resources linked to elections, the fiscal balance slipped to an estimated deficit of 0.6% of GDP, down from a surplus of 0.1% in 2017. Management of government debt remained controlled, at an estimated 18.2% of GDP at the end of 2017. In 2018, the Central Bank of the Congo lowered its key interest rate from 20% to 14% in view of more favorable developments in economic activity. Inflation was an estimated 27.7% in 2018, down from 41.5% in 2017. The current account deficit fell to 1.1% of GDP in 2018 from 3.6% in 2017, as a result of greater mining production.
Tailwinds and headwinds
Growth is projected to settle at 4.5% in 2019 and 4.6% in 2020. The primary sector, sustained by mining, should remain the key driver of growth. This outlook could be influenced positively by firm prices for the country’s commodities on the international market, successful elections in December 2018 (with results accepted by all stakeholders), progress in the security situation in the central and eastern parts of the country, control over the Ebola virus epidemic, and a start to diversification in the fabric of production. Contraction in production from China, the country’s main trading partner, could also affect the pace of growth.
The economy lacks diversity, with growth dependent largely on the extraction sector, which in 2017 accounted for 99% of the value of exports, 34% of total government revenue, and 2 points in GDP growth. The productive base of the economy must therefore be diversified for sustained, sustainable, and resilient growth. To achieve this, several constraints need to be removed. The main one is the infrastructure deficit that limits the country’s performance in terms of trade integration. In fact, the country has the highest import and export transactional costs in Africa because of the poor quality of railways, ports, air transport, and energy supply. With a ranking of 184 out of 190 countries on the World Bank’s Doing Business 2019 report, greater efforts must be made to improve the business climate.
The main challenge to budget policy is the structural weakness of domestic revenue (an average of 9% of GDP over 2016–18, compared with the average of 17% for Sub-Saharan Africa). More reform aimed at increasing domestic revenue will have to be made.
The country could better use the opportunities provided by the agriculture and wood sectors in its diversification efforts. The National Strategic Development Plan, now being finalized, aims for Democratic Republic of Congo to become a middle-income country by 2022 thanks to agricultural transformation. Establishing agribusiness parks in various areas and ensuring that small producers’ interests are taken into account will help. Industrializing the wood sector would strengthen the efforts being made in the agricultural sector.
Finally, the energy sector must be further liberalized to receive more investment. This would reduce the production costs of businesses and increase the population’s access to energy.