|Select Economic and Financial Indicators||2014||2015||2016||2017e||2018f|
|Real GDP (% change)||9.5||6.9||2.4||3.2||3.0|
|GDP (USD bn)||35.9||38.4||39.3||37.2||41.6|
|Fiscal Balance (% GDP)||1.2||0.9||-0.8||-1.0||-1.8|
|Broad Money (% change, end period)||12.6||10.5||21.8||47.7||55.7|
|Exports (USD bn)||12.6||10.5||10.1||11.3||14.6|
|Imports (USD bn)||15.8||12.8||12.0||13.3||16.0|
|Current Account Balance (% GDP)||-4.8||-3.9||-3.4||-4.6||-2.1|
|FX Reserves (USD bn, end period)||2.1||1.4||0.8||0.9||1.9|
|Exchange Rate (average)||936.29||939.37||984.61||1476.90||1791.45|
Real GDP: Following the extended recovery in copper prices in 2017, we see improved prospects for a re-opening of furloughed copper and cobalt mines (shut down during the peak of the copper price rout in 2016). Alongside, start of production from new gold mines, mining output looks set to rise over 2018. However, economic activity in the non-mining sector looks set to take the backseat ahead of elections now set to hold in December 2018. Ahead of the polls, we see heightened political tensions and potential for violence as constraining agricultural output. Furthermore, a combination of a tight monetary policy stance, fiscal retrenchment and a reduction in UN peace-keeping operations in DR Congo points to a subdued outlook for non-mining GDP growth over 2018. In the medium term, recent changes to the mining code in December, which will raise fiscal offtake from natural resources extraction, is likely to weaken investments into new mine projects. Consequently, we forecast a moderation in real GDP growth to 3% over 2018. (2017e: 3.2%).
Inflation: Though improving copper exports and tight monetary policy has bolstered reserve accretion, punitive cutbacks on donor funding to DR Congo and heightened capital flight ahead of the general elections means CDF depreciation is set to continue over 2018. Under this scenario, we see inflationary expectations becoming more entrenched and we see inflation accelerating over 2018 to 44%. (2017 average: 40.9%). Compounding outlook is the rise in crude oil prices, which will underpin higher transportation costs. Although the Banque Centrale du Congo (BCC) has tightened monetary policy in a bid to stem inflation, we believe a soft currency outlook would continue to fuel further upswing in inflation.
Fiscal balance: In contrast to an expansionary stance in 2017, fiscal spending as set out in 2018 budget is projected to decline 11% to CDF10.3trn. The brunt of the fiscal retrenchment is to be borne by capital expenditure (down 41% in the 2018 budget) while in preparation for the general elections set for December 2018, CDF912bn will be set aside to fund the conduct of polls. Though higher copper prices suggests an improvement in fiscal affairs, a 42% slash in projected donor receipts results in lower fiscal revenues in the 2018 budget (down 14% to CDF8.6trn). In response to the lack of progress towards general elections, international donors have cut back on funding to Joseph Kabila government. Although the government has continued talks with the IMF for financial assistance, we reiterate that an agreement is unlikely to be reached without clear resolution of the issues on political front. Accordingly, we see scope for a deterioration in the fiscal deficit beyond the projected 1.8% of GDP in the announced 2018 budget (2017e: 1% vs. 2016: 0.8%).
Current account: Largely reflecting the improved prospects for an expansion in mining output and rebound in the price of key commodity exports, (copper: 50%, cobalt: 30% and crude oil: 9%), we expect DRC’s current account deficit to narrow in 2018 (2.1% of GDP vs 2017e: 4.6%). On the import side, we expect the sharp CDF depreciation, tight monetary policy stance and fiscal retrenchment to drive muted import growth.
Risks to DRC’s outlook include delayed resolution to the ongoing political crisis (which continues to deter private sector activity and foreign investment into the country). In addition, a sharp fall in the price of commodities (particularly in copper), and the weaker levels of government spending pose headwinds to economic growth.
Exchange rate structure
|Target||No official target but de facto anchored to the USD|
|Type of intervention||Via spot market|
|FX Products||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Daily trading volume (USD mn)||n/a||n/a|
|Average trade size (USD mn)||n/a|
|FX Market Structure||The economy is highly dollarised; most transactions are carried out in USD. The Central bank is not a major supplier of FX but organizes timely bid offers to reduce the depreciation of the Congolese Franc; however, mining firms are the main suppliers of FX. Companies working in the value chain of the mining sectors are also FX providers as well.|
|Non-resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||No restrictions||n/a|
|Resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||No restrictions||n/a|
|Primary Market||Treasury bills||Treasury notes||Treasury bonds||Central Bank bills||OMOs|
|End use||Lidquidity management|
|Maturity structure||7- to 84-days|
|Daily trading volume||Limited trading|
|Average trade size||Limited trading|
|Ecobank local affiliate contact details:|
Ecobank Democratic Republic of Congo, Avenue Ngongo Lutete 47, Commune de Gombe, Kinshasa
Tel: +243 99 60 16 000
|Democratic Republic of Congo Debt||2014||2015||2016||2017e||2018f|
|Government debt (% GDP)||17.5||16.1||16.8||17.0||15.8|
|External debt (official creditors, % GDP)||13.7||12.5||11.6||11.2||10.9|
|External public debt stock (USD bn)||4.9||4.8||4.5||4.5||4.5|
|Share of total sub-Sahara debt (%)||2.0||1.8||1.5||1.4||1.3|
Hydrocarbon & mineral production
The Democratic Republic of Congo (DRC) has one of the richest endowments of minerals in Middle Africa and is a highly diversified mineral producer. However, given the country’s long history of political instability and the fragmentation of the mining sector in conflict areas, the true size of mining output remains unclear, with large volumes of minerals being smuggled into neighbouring countries, notably Rwanda and Uganda. The DRC is Africa’s largest producer of copper (just ahead of Zambia), with estimated output of 850,000 tonnes in 2016. The DRC also produced 64,000 tonnes of cobalt, 12,000 tonnes of zinc and 5,000 tonnes of tin in 2016. That year the DRC produced an estimated 869 tonnes of coltan, a vital component in smartphones, although the true volume of production is not captured in official data owing to rampant smuggling into neighbouring countries. The DRC is the world’s second largest producer of diamonds (and the largest producer in Africa), with estimated output of 23.2mn carats in 2016, most of which comes from artisanal alluvial production. The country is also a modest producer of gold, estimated at 23 tonnes in 2016.
Despite having rich hydrocarbon reserves, the DRC produces just 20,000 bpd of crude oil, all of which is exported. The country has proven reserves of 180mn barrels of oil and recent geological surveys indicate it could potentially have over 5bn barrels of undiscovered crude oil reserves and 30bn cubic feet of coal-bed methane gas. The country’s only refinery, the 16,000-bpd Société Congo-Italienne de Raffinage (SOCIR), has been closed since 2001 following the withdrawal of the Italian parner, ENI. Since then, the Congolese government has been trying to conclude the sale of ENI’s 50% stake in the refinery to a new investor in order to inject new capital for the rehabilitation of the plant. Domestic consumption of petroleum products is estimated at 960,000 tonnes per year, of which diesel makes up 70% (mostly used for power generation). Given the lack of domestic refining capacity, the DRC imports all of its petroleum products, with over 80% coming from South Africa, Côte d’Ivoire and Zambia.
Soft commodity production
The DRC does not produce cash crops on a large scale, owing to the collapse of the commercial agricultural sector following independence and decades of political instability. The focus of domestic production is staple foods, which included 14.7mn tonnes of cassava, 1.2mn tonnes of maize, 1.1mn tonnes of plantains and 1mn tonnes of roots & tubers in 2016. That year the country’s cash crop production included 421,000 tonnes of groundnuts, 215,000 tonnes crude palm oil (the fifth largest producer in Africa), 189,000 tonnes milled rice, 46,000 tonnes of raw timber and 12,000 tonnes of natural rubber. The DRC also produces small volumes of Robusta coffee, with estimated outturn of 335,000 60-kg bags in 2016/17 (October-September).
The DRC’s imports totalled US$4.4bn in 2017. The country is heavily dependent on imports of capital and consumer goods, reflecting the poorly developed manufacturing sector. In 2017 the DRC imported US$838mn worth of machinery & vehicles, US$397mn of pharmaceuticals and US$345mn of electronics. The country also depends on imports of raw industrial materials, including US$328mn worth of iron & steel, US$190mn of plastics and US$147mn of sulphuric acid (used for making fertiliser). Given the lack of refining capacity, the country is entirely dependent on imports of petroleum products, worth US$144mn in 2017. The country also imports large volumes of food, including meat (worth US$138mn), sugar (US$126mn) and cereal (US$72mn).
The DRC’s exports totalled US$8bn in 2017. Copper is DRC’s most valuable export, with refined copper and ore together worth US$3.7bn that year, the bulk of which went to China, Korea and Saudi Arabia. The country’s other mineral exports included cobalt (refined, oxides & ore) worth US$3.1bn, all of which went to China, diamonds (US$251mn) and coltan (US$32mn). However, large volumes of the country’s mineral exports, notably gold, coltan and tin, are smuggled into neighbouring countries and are not captured in official trade data. The DRC is also a significant exporter of crude oil, worth US454mn in 2017. The DRC exports small volumes of cash crops to international markets, including wood (worth US$72mn), cocoa (US$25mn) and coffee (US$19mn).