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Central African Republic Economic Outlook
The economy is experiencing a slow recovery after a period of recurring sociopolitical crises that began at the end of 2012. Real GDP grew by an estimated 4.3% in 2018, up from 4.0% in 2017, led by the primary sector through a rebound in logging, agriculture, and mining.
The fiscal balance improved to an estimated surplus of 1.0% of GDP, from a deficit of 1.5% in 2017. Despite the tightening of the Bank of Central African States’s monetary policy, due to difficult security conditions, inflation was an estimated 3.9% in 2018, down from 4.1% in 2017 but still above the Central African Economic and Monetary Community’s 3% requirement. The current account deficit improved to an estimated 8.3% of GDP in 2018 from 9.4% in 2017, thanks to improvements in the trade balance.
Tailwinds and headwinds
The economic recovery is projected to continue in 2019 and 2020, with real GDP growth of 5.0%. The primary sector is expected to benefit from a resumption of farming and the continued good performance of mining operations. Public investment and private consumption are expected to be the drivers of growth. Inflation is projected to fall gradually to 3.2% in 2020, reflecting improved security conditions and declining food prices. The fiscal surplus is projected to be 0.6% of GDP in 2019, dropping to 0.2% in 2020, as a result of the gradual rise in revenue and control of public spending. The current account deficit is projected to fall to 7.3% of GDP in 2019 and 7.0% in 2020, reflecting a recovery in domestic production, improved current transfers, and a narrower trade deficit.
The economic outlook is favorable, albeit uncertain. Economic growth depends largely on political stability, continued reform, improved performance of the forestry sector, and public investment under the National Development Plan. Low economic diversification and heavy dependence on foreign aid (more than 40% of the budget) and oil products leave the economy vulnerable to external shocks.
Despite the 2016 return to constitutional rule, the country remains fragile, particularly in terms of security, and is characterized by a limited infrastructure network, a low Human Development Index value, weak governance, and high vulnerability to external shocks.
The restoration of peace throughout the country and the improvement of the business climate are necessary conditions to attract private investment, which could enable the country to take advantage of its enormous forestry and mining potential. Authorities have already revised the trade and tax code and submitted a revised investment charter to parliament to strengthen the dialogue between the public and private sectors.
The country’s forestry and ecotourism resources cover some 34 million hectares. In 2017, the exploitation of some of these forestry resources, which contain a broad range of varieties, accounted for about 40% of export earnings. In addition, the country has substantial mineral resources such as diamonds, gold and uranium, iron, and copper. However, only diamonds are mined by an artisanal sector and account for about 35% of export earnings, thanks to the partial lifting of the Kimberley Process embargo.