经济研究
Congo

Congo

Population 4.6 million
GDP 2,746 $US
D
Country risk assessment
D
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) -6.2 -3.5 -8.0 0.0
Inflation (yearly average, %) 1.2 2.2 2.5 2.7
Budget balance (% GDP) 5.8 5.8 -2.0 0.0
Current account balance (% GDP) 1.5 3.5 -6.0 0.0
Public debt (% GDP)* 88.0 90.0 105.0 100.0

 

(e): Estimate (f): Forecast *Excluding disputed arrears, SNPC debt to oil companies, unsecured debts of public companies

STRENGTHS

  • Abundant natural resources (oil, gas, iron ore, timber, potash) and agricultural potential
  • Potential for economic diversification with the opening of free zones
  • Membership of CEMAC
  • Patience and discretion on the part of international and bilateral financial partners
  • Development projects funded by partners

WEAKNESSES

  • High dependence on oil
  • Weak manufacturing activity, leading to dependence on imported goods
  • Lack of communication, education, health and urban infrastructure
  • Insufficient poverty reduction despite oil wealth
  • Disadvantageous business environment: poor governance, corruption, informality
  • Lack of transparency on the use of the oil windfall, despite progress in the implementation of the EITI standard
  • External and domestic over-indebtedness, not taking into account the disputed arrears (14% of GDP), the unsecured debts of public companies (9%) and the debt of the national oil company vis-à-vis operators, which alone increases the debt by a third

Risk assessment

Growth conditioned by oil production

The decrease in the price and production (-17% in 2020) of oil (60% of GDP), added to the measures taken to contain the COVID-19 pandemic (lockdown, border closures, curfews, closure of non-essential businesses etc.) led to a deep recession in 2020. 2021 is expected to see a stabilisation of activity. The average price of oil over the year is expected to be slightly higher and production is expected to benefit from the increase in quotas provided for by the OPEC+ agreement. This will automatically benefit exports, of which oil constitutes 90%. However, despite the exploitation of new fields (Moho, Banga-Kayo, Néné-Banga), operational constraints could limit the recovery. Agricultural production (7% of GDP) is also expected to increase, barring further severe flooding. Household consumption, which has suffered greatly from the lockdown and the associated drop in income, will pick up again, with some benefit to services (40% of GDP). Investment is also expected to pick up again in the framework of public-private partnerships, notably with Chinese partners under the aegis of COIDIC for the construction of a refinery and a gas power plant at Pointe-Noire, the renovation of the railway line between the Mayoko iron mine and Pointe-Noire in collaboration with the local operator SAPRO, mobile telephone coverage, or the continued creation of four special economic zones (including one at Pointe-Noire) aimed at diversifying the economy. However, some COVID-19-linked restrictions could persist for at least several months, as a resumption of the epidemic was observed at the end of 2020, due to the observation of measures made difficult by difficult living conditions (close contact, day-to-day income, and informality). Moreover, poor payment behaviour in the public sector will continue to hamper activity in the non-oil sector.

 

Over-indebtedness that is difficult to reduce

The large public surplus gave way to a small deficit in 2020. This is mainly due to the fall in oil revenues (65% of the total), as the authorities have attempted to increase revenues and reduce non-essential expenditure, while at the same time opting not to pay all their suppliers' bills. With the recovery of oil revenues in 2021, public finances are expected to be close to balance. Moreover, fiscal austerity, focused on increasing revenues and reducing the non-oil primary deficit (i.e. excluding debt interest and oil revenues), will regain the upper hand. This approach aims to remedy the debt overhang the country has been facing since 2016. In 2019, debt repayment absorbed 50% of revenues and represented about 10% of GDP (excluding repayment of amounts owed to commodities traders Trafigura and Glencore, which are being restructured and suspended). The country is, in fact, in the process of negotiating a restructuring of its debt. As already mentioned, since April 2020, negotiations have been underway with two commodity traders who have pre-financed oil deliveries by Congo's national oil company, Société Nationale des Pétroles du Congo, which has a third of the quantities extracted by three major international companies (Chevron, ENI and Total). This amounts to USD 1.7 billion, or a quarter of the external public debt (half of which was subscribed to from official creditors), which itself constitutes 70% of the public debt. Negotiations are also reportedly underway with Chinese creditors for an amount representing one third of this same debt. Furthermore, in October 2020, five local financial institutions constituting the Brazzaville Club advanced EUR 460 million, part of which is to be used to refinance one third of the domestic debt (26% of GDP, more than half of which is in arrears), by direct payment to creditors, but at a discount. These restructurings are an IMF requirement for the unblocking of the USD 450 million three-year Extended Credit Facility granted in 2019 and replenished by the ADB, the World Bank and France, after China had already conceded a restructuring. In their absence, the country has been unable to access COVID-19 emergency aid from multilateral institutions. On the other hand, it has been able to benefit from the suspension of its debt service to the G20 countries, equivalent to 2% of GDP for each of the years 2020 and 2021. Together with drawings on foreign exchange reserves deposited with the Regional Central Bank (BEAC), representing only one month's worth of imports, and external project financing, this has made it possible to cover the external current balance, which shifted from a surplus to a deficit in 2020 due to the fall in oil exports. With the recovery of the latter, it is expected to be balanced in 2020.

 

Yet another re-election of the president

Denis Sassou Nguesso, who has been in power for 23 years, is expected to once again win the presidential election of March 2021, despite the growing discontent due to the crisis among a population that has hardly benefited from the oil windfall and which has, on the contrary, seen its income decline since 2018. The opposition is weak and divided and its representatives have often served the president. On the external level, relations with China, an important creditor and provider of investment, will remain close, as they will with France, despite the Paris judicial enquiry into the ill-gotten gains of those close to the Congolese government, as well as with Russia (hydrocarbons, military) and Cuba (health).

 

Last updated: March 2021

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