Population 74.749 million
GDP 17.698 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
7.2 |
6.9 |
7.2 |
8.2 |
|
Inflation (yearly average) (%)
|
23.5 |
15.5 |
10.9 |
9.5 |
|
Budget balance (% GDP)*
|
-9.1 |
-10.3 |
-11.2 |
-10.1 |
|
Current account balance (% GDP)*
|
-14.8 |
-16.6 |
-16.9 |
-18.5 |
|
Public debt (% GDP)
|
35.1 |
29.9 |
32.3 |
34.7 |
|
(e) Estimate (f) Forecast * Grants excluded |
||||
STRENGTHS
- Rich arable land
- Abundant mineral resources (copper, cobalt, diamonds, gold, tin)
- Considerable hydraulic potential (Inga dam)
WEAKNESSES
- Persistent tensions in the east of the country with substantial risk of civil war
- Disorganised and defective infrastructures
- Lack of transparency leading to international donors’ loss of interest
- Conflictual relations with neighbouring countries (Rwanda)
Risk assessment
Growth driven by the mining sector, which could be affected by the instability of the security situation
The DRC’s weak integration into world trade has protected it from the international economic slowdown and enabled it to achieve high growth in 2012, which is expected to accelerate slightly in 2013. Agriculture and the extractive industries will remain the chief drivers of activity. Mining production will increase thanks to the exploitation of new mines (gold and copper). The expansion of industrial production, however, will be restricted by infrastructure shortcomings (transport, electricity), although infrastructure projects (thermal and hydro-electric power stations, road network) will support construction. However, the uncertainties concerning the evolution of the country’s security situation make growth predictions uncertain. Conflicts between the regular army and the M23 rebels in the east of the country could impact on the mining operation in this region (tin). Moreover, the Goma region, the scene of frequent clashes, is a transit zone for the trade in gold and diamonds. Inflation was stimulated in 2012 by the high price of imported foodstuffs and energy and also by the introduction of VAT. Tensions will ease somewhat in 2013 but inflation will remain high. In November 2012, the authorities announced measures to “dedollarise” the economy in favour of the Congolese franc. The process also implemented in Mozambique, Angola, Ghana and Zambia aims to gradually improve the effectiveness of the Central Bank’s monetary policy, currently very reduced to the extent that 90% of deposits and 95% of credits are denominated in foreign currencies.
High fiscal and current account deficits in a context of growing mistrust on the part of international donors
The fiscal deficit will remain high in 2013. Tax income will grow thanks to the introduction of VAT and increased mining production, but will remain limited by the scale of illegal production (gold), tax exemptions and the shortcomings of the tax collection system. Moreover, external funding is shrinking. The IMF’s decision in late 2012 to suspend the “Extended Credit Facility” ($225mn) because of the mining sector’s opacity is not expected to reassure backers. As to spending, priority will be given to military spending to the detriment of investment, which easier to postpone than current spending. The near systematic recourse to “urgent” off- budget spending (not needing Parliament’s agreement) poses a risk to the development of public debt despite the relief obtained under the HIPC initiative in 2010.
Exports of mining products are expected to grow amid increased production and high prices (copper and gold). But imports of capital goods and services for infrastructure development, as well as mining companies’ repatriation of profits will widen the current account deficit in 2013. Heightened conflicts in the east of the country might worsen the balance further. China will continue to invest in the DRC but certain investors could be discouraged by plans to reform the mining code (State participation raised from 5% to 35%, tax increase). Borrowing will be unavoidable, necessitating careful watching of the external debt, which is expected to exceed 40% of GDP in 2013.
The banking sector, consolidated by the closing of several banks in 2010, suffers from serious prudential shortcomings.
Worsening security situation
Socio-economic conditions in the Democratic Republic of Congo are still profoundly affected by the years of conflict in the country. The armed conflicts setting the army against the rebels of the 23rd of March Movement (M23) keep the security situation very tense, particularly in eastern province of North Kivu. The outcome of the negotiations between the Congolese authorities and the M23 representatives, who are demanding integration in the armed forces and the opening of a national political dialogue, remains very uncertain, leading to fears of a new generalised conflict. The business climate will continue to suffer from this security situation, from the mining sector’s lack of transparency and from the weak legal protection for foreign investors. The DRC does not apply the New York convention on the Recognition and Enforcement of Foreign Arbitral Awards.
