DR Congo Country Risk Report Q4 2017
An ongoing political crisis will undermine economic activity over thecoming quarters, as the lack of needed financing had led to fallingimports, rising inflation, and widespread insecurity. Downside risksare growing as the continuation of the crisis could further delay theresumption of needed capital inflows.
The Congolese franc will continue to depreciate over the comingmonths in light of external account imbalances driven by a lack offinancing, which will underpin double-digit inflation.
Imports will remain under pressure, which will have downside implicationsfor growth.
Stability will hinge on an improvement in the political environment.
Deteriorating security and uncertainty over policy direction havereduced donor assistance and dissuaded investment, both keysources of needed capital inflows.
Although elections are unlikely to be held in 2017, President JosephKabila will be forced to hold elections in 2018 by unrest and oppositionamong foreign donors.
Elections will led to a resumption of external financing and producemore clarity on policy direction, supporting investment and a stabilisationof the economy.
In 2018, strong mining sector production and stabilising externalaccounts will support an acceleration of economic growth.
Major Forecast ChangesWe have downgraded our real GDP growth forecast for 2018 to 4.2%,from 6.4%. This reflects our views that inflation will be higher andgovernment spending lower than we previously expected, weighingon consumption.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Non-Mining Activity Undermined By Political Crisis
- The Democratic Republic of Congo ongoing political crisis will undermine economic activity over the coming quarters, as the lack of
- needed financing had led to falling imports, rising inflation, and widespread insecurity. Downside risks are growing as the continuation of
- the crisis could further delay the resumption of needed capital inflows.
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- External Trade And Investment Outlook
- External Stability Rests On Political Improvement
- Although the DRC's current account deficit will narrow over the coming quarters, its external accounts will remain under pressure as
- political instability weighs on the capital inflows needed to cover its financing needs. A ban on common imports will likely spur further
- inflation and undermine growth.
- Outlook On External Position
- TABLE: CURRENT ACCOUNT BALANCE FORECASTS
- TABLE: TOP 5 GOODS EXPORTS IN 2016
- TABLE: TOP 5 GOODS IMPORTS IN 2016
- Currency Forecast
- CDF: Depreciation Set To Continue
- The Congolese franc will depreciate over the coming months, reflecting severe strain on the DRC's external accounts. That said, over
- a multi-quarter timeframe a resolution of the country's political crisis and mining sector growth will support a gradual stabilisation of the
- TABLE: BMI CURRENCY FORECASTS
- Monetary Policy
- Inflation Will Continue To Rise
- Inflation in the DRC is likely to continue rising into 2018 due to currency weakness, import restrictions and rising oil prices. Although
- monetary policy will tighten, a high degree of dollarisation in the formal economy will limit its effect on inflation.
- TABLE: COMPARISON OF Y-O-Y INFLATION FIGURES
- Monetary Policy Framework
- TABLE: MONETARY POLICY FORECASTS
- Fiscal Policy And Public Debt Outlook
- Fiscal Struggles Will Undermine Growth
- The Democratic Republic of Congo will continue to struggle to finance its operations while its political crisis persists, given lenders
- unwillingness to extend credit to the central African sovereign. Although expenditure cuts will keep the deficit contained, salary arrears
- and reduced subsidies will undermine economic activity.
- Structural Fiscal Position
- TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- Chapter 2: 10-Year Forecast
- The DRC Economy To 2026
- Size Will Prove A Double-Edged Sword
- While the sheer enormity of the Democratic Republic of the Congo will help drive economic growth via a large population and wide
- resource base, it will weigh on development of non-extractive sectors due to the challenges of developing adequate infrastructure and
- state control over such a large territory.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Kabila's Defiance Extends Political Crisis
- The Democratic Republic of Congo's political crisis will extend well into 2018, as the government of President Joseph Kabila continues
- to delay overdue elections. With the opposition agitating for Kabila's departure and international lenders largely unwilling to deal with
- Kabila's cash-strapped government, political uncertainty will continue to aggravate the country's economic struggles.
- Long-Term Political Outlook
- Prospects For State-Building Remain Slim Amongst Structural Headwinds
- Domestic and international efforts at state-building in the Democratic Republic of Congo will be undermined by structural challenges,
- varying in nature from the sheer size of the country to its lack of democratic roots. While political volatility will likely be a frequent
- occurrence over our long-term outlook, these structural headwinds to stability will make it difficult for successive governments to
- progress with the state-building project.
- Chapter 4: BMI Global Macro Outlook
- As Good As It Gets?
- TABLE: GLOBAL MACROECONOMIC FORECASTS
- TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
- TABLE: THE DEMOCRATIC REPUBLIC OF THE CONGO – MACROECONOMIC DATA AND FORECASTS