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 6.3%.
The copper price remains well below USD5,000/tonne, forcing more mines to cease operations and make redundancies.
A major flare-up in violence as the 2016 elections approach worsens what is already a questionable investment climate.
|e/f=BMI estimate/forecast. Souce: National Sources/BMI|
|Nominal GDP, USDbn||36.0||39.7||42.0||46.8|
|Real GDP growth, % y-o-y||9.5||7.3||6.6||7.6|
|Consumer price inflation, % y-o-y, eop||1.0||1.6||3.0||2.5|
|Exchange rate CDF/USD, eop||920.00||925.00||962.86||972.49|
|Budget balance, % of GDP||-3.5||-4.0||-4.9||-4.0|
|Current account balance, % of GDP||-10.1||-10.8||-11.2||-9.4|
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