Market Research Logo

Democratic Republic of the Congo Country Risk Report Q2 2016

Democratic Republic of the Congo Country Risk Report Q2 2016

Core Views The Democratic Republic of the Congo will experience a mild slowdown in real GDP growth in 2016 as the copper sector continues to struggle in a climate of low prices and political risk weighs heavy on investor sentiment. Inflation will gently rise in the Democratic Republic of the Congo in 2016, as a widening of the current account deficit and low foreign reserves sees the local currency weaken slightly, raising the cost of imports. However, an increase in prices will be insufficient to warrant a hike in the policy rate by the Banque Centrale du Congo. The budget deficit will peak in 2016 in the Democratic Republic of the Congo, as government revenues continue to suffer on the back of weakness in the copper sector. Although the law requires the government to balance its books, we believe that this year's elections will keep the public coffers firmly in the red. The Democratic Republic of the Congo's current account will deepen in 2016 due to the weak outlook for its mining sector. Due to an unappetising investment climate and limited government reserves, the current account will be fuelled primarily by increasing external debt issuance by the government. The outlook for political risk will deteriorate in the Democratic Republic of Congo (DRC) in 2016, as both foreign and domestic threats to stability heighten tensions and increase the likelihood of violence. Given that the likelihood of any near-term improvements in DRC's political situation is low, these destabilising dynamics risk undoing much of the progress made over the past two years. Major Forecast Changes Political risks caused by increasing tensions surrounding the presidential election and the escalation of violence in neighbouring Burundi will likely weigh on investor sentiment towards the DRC over 2016, leading us to adjust our forecast for real GDP growth from 6.7% to 6.6%.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth
Growth Dips On Weak Copper Sector And Political Risk
The Democratic Republic of the Congo will experience a mild slowdown in real GDP growth in 2016 as the copper sector continues to
struggle in a climate of low prices, and political risk weighs heavy on investor sentiment.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Electioneering And Commodity Slump Deepen Budget Deficit
The budget deficit will peak in 2016 in the DRC, as government revenues continue to suffer on the back of weakness in the copper
sector. Although the law requires the government to balance its books, we believe that 2016 elections will keep the public coffers firmly
in the red.
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
External Trade And Investment Outlook
Current Account Deficit Deepens Despite Limited Liquidity
The Democratic Republic of the Congo's current account will deepen in 2016 due to the weak outlook for its mining sector. Due to an
unappetising investment climate and limited government reserves, the current account will be fuelled primarily by increasing external
debt issuance by the government.
Outlook On External Position
TABLE: TOP 5 GOODS EXPORTS IN 2014
TABLE: TOP 5 GOODS IMPORTS IN 2014
Monetary Policy
Inflation To Remain Manageable Despite Slight Increase
Inflation will gently rise in the Democratic Republic of the Congo in 2016, as a widening of the current account deficit and low foreign
reserves sees the local currency weaken slightly, raising the cost of imports. However, an increase in prices will be insufficient to
warrant a hike in the policy rate by the Banque Centrale du Congo.
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The DRC Economy To 2025
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
Political Risk Increases On Growing Domestic And External Threats
The outlook for political risk will deteriorate in the Democratic Republic of Congo (DRC) in 2016, as both foreign and domestic threats to
stability heighten tensions and increase the likelihood of violence. Given that the likelihood of any near-term improvements in the DRC's
political situation is low, these destabilising dynamics risk undoing much of the progress made over the past two years.
TABLE: POLITICAL OVERVIEW
Long-Term Political Risk
Structural Weaknesses Will Prolong Instability
There is little chance that DRC will succeed in overcoming the many structural weaknesses that have made it one of Sub-Saharan
Africa's least stable countries. While the consolidation of power by the central government remains possible, our core scenario is that
Kinshasa's authority over provincial governments will remain limited and that perceived corruption, violence, and poor institutions will
continue to characterise the DRC at the local level. A return to the civil war and anarchy of the 1990s is unlikely, but remains a risk.
Chapter 4: Operational Risk
SWOT Analysis
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report