The Republic of Congo is endowed with a wealth of assets that can be used to build a robust economy, improve the living standards of its population, and drive the economic growth of the sub-region.
The country has substantial oil reserves, vast natural forests (close to 22 million hectares), and extensive arable land (10,000,000 hectares). It also has a highly developed hydrographic network, a climate conducive to agriculture, a world renowned biodiversity that helps regulate greenhouse gases, and mineral resources. It is also strategically positioned in Central Africa, possessing a 170-kilometer long coastal front on the Atlantic Ocean and a deep-water port in Pointe-Noire that could benefit the entire sub-region.
While the country has made some progress in transforming its natural resources into economic growth, its social indicators remain low compared to countries in similar contexts. Given its important resource base and a population of only 4.1 million, located primarily in the three largest urban centers, the Republic of Congo could be an emerging economy over the next 15 to 20 years if the right polices and action are taken by the policy makers.
However, the Republic of Congo’s economic performance over the last three years has been far behind the growth rate needed to achieve its development goals by 2025. In the past decade, the average annual economic growth rate of Congo was lower than that of lower middle income countries (LMICs). The Republic of Congo remains fragile; the high poverty rate, unemployment, inequalities, and low access to efficient public services are significant challenges to the country.
In July 2015, President Denis Sassou-Nguesso held national consultations to end the debate surrounding a change or revision of the constitution to give the current president the legitimacy to run for a third term in the upcoming presidential elections. The consultations concluded in the adoption of a new constitution that includes the following changes: (i) removal of the age restriction and two-term limit, replacing it with a three term limit moving forward; (ii) the creation of a Prime Minister’s position; and (iii) decentralization as a method of political and economic governance in key sectors like agriculture and education. The new text was put to a referendum in October 2015 and the revisions were approved with 92% of the votes in favor of the change; however the local opposition held an alternative consultation and concluded that they were against the change of the constitution.
On March 20, 2016, presidential elections were held and featured nine candidates, including incumbent President Denis Sassou-Nguesso who won with 60% of the vote. The results are highly contested by the opposition.
Over the past five years, Congo’s economic performance has fallen short of the target growth rate needed to achieve the 2025 development goals. Between 2011 and 2015, the economy grew at a rate of 4%, compared to the projected growth rate of 8.5% set forth in the country’s National Development Plan (NDP). This growth is attributed to the poor performance of the oil sector, where production fell by 5.4% over the same period. The non-extractive sectors’ good performances depend on mixed effects from activities in the manufacturing, electricity, gas, and telecommunication sectors, and public investments in infrastructure (9.7%). In 2015, the economy posted a 3% increase in growth. Annual inflation is under control and fell sharply between 2012 and 2015, from 5% to 0.9%. It is now holding below the 3% ceiling set by the Economic Community of Central African States (CEMAC).
The government opted to slow the pace of public expenditures in 2015 in order to amend its fiscal policy following the decline in oil prices. Between 2011 and 2013, government revenues increased by 13% on average and decreased by 26% over 2014-2015. The decrease in public expenditures helped offset the substantial reduction in oil revenues caused by a slowdown in oil production and prices. In addition, Congo’s reserves at the Bank of Central African States (BEAC) declined by 19% in 2015, and can cover up to six months of imports in 2016.
Economic growth is expected to remain moderate, with a projected annual average growth rate of 3% over the 2016-2018 period. This growth is expected to be driven by the extractive sectors, as a strong increase in oil production is expected. While government consumption will be contained, the government will post a substantial fiscal deficit of about 10.5% of GDP as revenues will be reduced. This deficit is expected to be financed by the issuance of new debt, by drawing on government deposits or by borrowing from the regional central bank. Given the projected decline of the nominal GDP in 2016, the resulting debt-to-GDP ratio would exceed 50% in 2016. Overall, the current account deficit is projected to stand at 17% in 2016. The economy remains vulnerable to exogenous shocks such as the volatility of oil prices, and mining production delays. Internal risks also remain, but have been taken into consideration in the government’s economic strategy.
Last Updated: Apr 13, 2016