Central African Republic Economic Outlook

Economic performance and outlook

Deteriorating security accounted for stagnant growth from 2016 to 2017. Security issues increased the number of displaced persons, hindering agricultural production, trade, and foreign investment. Real GDP growth in 2017 was estimated at 4.5%, indicating some economic recovery, but fell short of the projected 5.3%. Growth was driven primarily by recovery in forestry and mining following the lifting of international sanctions, as well as by the vitality of the tertiary sector and trade. Although returning farmers and insecurity continued to weigh on agriculture and livestock production, economic activity is expected to rise in 2018–19, and average annual growth is projected at 5% or higher. Growth in 2018 and 2019 will hinge on improved domestic security, which is crucial to agricultural recovery and implementation of investment plans and economic reforms supported by international partners.

Macroeconomic evolution

Ongoing efforts initiated during the transition period in 2017 to consolidate public finances made it possible to leverage more public resources while improving the management of public finances. The budget balance shrank to an estimated deficit of 0.1 of GDP in 2017 due to higher public expenditure, particularly social expenditure. Public expenditure exceeded 14.5% of GDP in 2017, and domestic revenues were 8.9% of GDP in 2016. Inflationary pressures fell with the gradual recovery in food production, improved security along the main transportation corridor for foreign trade, and overall currency stability within the Central African Economic and Monetary Union. Inflation fell to an estimated 3.8% in 2017, from 4.6% in 2016. Measures to clear arrears reduced public debt, allowing the debt-to-GDP ratio to drop from 44.3% in 2016 to 38.3%  in 2017. The current account deficit rose to 9.7% in 2017, from 5% in 2016, due to a decline in exports; import volumes remained roughly the same.

Tailwinds

After three years of difficult political transition, the strongest tailwind was the return of constitutional order, during which the main civilian institutions specified in the Constitution were established. Another tailwind was the international community’s support for the new leaders’ efforts to promote a peaceful, democratic, and prosperous society. The structural and economic reforms resulted in significant progress, particularly in public finances.

Headwinds

The political transition following the overthrow of the Bozizé regime by the Seleka rebellion ended, but serious security issues remain. Although security in the capital Bangui improved sharply, intercommunity tensions and clashes between armed groups still plague the country. This unrest prevents public services and humanitarian organizations from reaching people affected by the crisis. The economy faces major structural problems, particularly a severe shortage of infrastructure and a business climate that remains unattractive to private investors.