Congo Economic Outlook

Economic performance and outlook

The economy is expected to contract further in 2017 in response to the continued decline in oil prices, the country’s main source of export revenues, and weak response from nonoil sectors. Real GDP declined an estimated 4% in 2017, following a contraction of 2.8% in 2016. The decline in international oil prices, compounded by dependence on oil revenues, continues to undermine Congo’s efforts to diversify its economy and increase its resilience. The economy is projected to expand 3.1% in 2018 and 2.1% in 2019, driven by higher oil production, following the exploitation of the Moho-Nord oil field, which accounts for 19.3% of the country’s production.

Macroeconomic evolution

Weak economic growth prospects and lower oil revenues continue to dampen the budget balance. However, as the result of controlled government spending measures, the budget deficit was estimated at 4.4% of GDP in 2017, down from 12.9% in 2016. The budget is projected to turn a surplus of 2.8% of GDP in 2018 and 4.2% in 2019. Monetary policy is managed by the BEAC following the fixed parity between the CFA franc and the euro. Inflation was an estimated 1.6% in 2017, down from 3.6% in 2016, which was above the ceiling of 3% authorized in the Central African Economic and Monetary Community. External public debt, particularly from Chinese creditors, reached 110% of GDP in 2016 and is projected to further rise. This increased borrowing has raised the risk of debt distress and presents a serious threat to the government’s plans to improve resilience. Unemployment remains a major challenge; approximately 30% of the workforce ages 15–24 has no job.

Tailwinds

Congo continues to grapple with low oil prices and lack of structural reforms to boost its untapped potential. However, weaker oil prices offer the opportunity to build the foundations for diversification. Reviving industries and construction will be key growth drivers. In addition to abundant natural resources in oil, forestry, and minerals, Congo can leverage its strategic position in Central Africa and its 170 km coast to boost its economy. Development projects to renovate and modernize the international airports in Brazzaville, Ollombo, and Pointe-Noire will support foreign investment. In transport, progress has been made on key economic corridors, existing highways have been modernized, and new ones have been constructed. Finally, the government has launched ambitious reforms, such as The March toward Development, to improve the quality of life over the next five years.

Headwinds

Although great strides have been made, Congo lags behind other African countries at a similar level of development. Heavy dependence on oil commodities exacerbates the already fragile external position. An onerous business environment impedes competition and investment and discourages potential investors. Congo fell two places in the rankings of the World Bank’s 2018 Doing Business report, from 177 to 179 out of 190 countries. Congo’s Human Development Index value was 0.592 in 2016, ranking it 135 out of 188 countries. The poverty rate, which fell from 50.2% in 2005 to 36.9% in 2011, remains one of the highest in Africa. With a Gini inequality coefficient of 0.489 in 2011, Congo’s inequality is the second highest in Africa, after South Africa. Slow economic growth in developed countries or other economic partners could hurt demand for commodity exports.

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