We forecast that the Democratic Republic of Congo (DRC) will record real GDP growth of 8.5% in 2015. This is an upward revision to our outlook since our last quarterly update - we previously anticipated growth of 7.8% - due largely to strong export figures through the first quarter of the year. Nevertheless, it is slower than the 9.5% forecast by the IMF this year. We believe that the Fund's expectations for growth do not make sufficient allowances for investors fears regarding the country. These will be heightened by ongoing violence in the east of the country; increasing tensions regarding President Joseph Kabila's ambitions for a third term; and a proposed hike to mining royalty taxes. In 2016, we anticipate a slight uptick in growth to 8.9%, as investment and government consumption rises.
We stick to our view that the Banque Centrale du Congo (BCC) will maintain its key policy rate at 2.00% through the course of 2015 and into 2016, as laid out in our previous quarterly update. This was vindicated by the bank's latest monetary policy committee (MPC) meeting on May 7, when it elected to keep rates as they stood, citing below-target inflation and a relatively stable currency.
We forecast that the DRC's current account deficit will be equivalent to 8.7% of GDP in 2015, a slight narrowing from the deficit of 9.6% of GDP recorded in 2014. Despite global prices for copper - a key export of the Central African country's - remaining depressed, there has been strong growth in production, and we expect that this will continue over the remainder of 2015 and into next year. In 2016, we forecast that the current account deficit will narrow further, to 7.7% of GDP. We do not believe that this deficit - despite being substantial - is cause for concern. Although investor concerns will be heightened thanks to political tensions in the country, we expect that investment inflows will remain sufficient to cover the shortfall.
Tensions in the Democratic Republic of Congo (DRC) will remain elevated through the remainder of 2015 and into 2016, as presidential elections - scheduled for November 27, 2016 - approach. It still appears likely that current president, Joseph Kabila, will seek to remain in office beyond the conclusion of his current term - his second, and the last to which he is constitutionally entitled. This will result in sporadic violence over the issue. Coupled with ongoing security issues and ethnic tensions in the east of the country, the DRC will remain a low scorer on our proprietary political risk scores.
Key Risks To Outlook:
A sharper-than-expected fall in copper prices would cause mining investment to slow further.
Violence in the copper-producing province of Katanga currently poses little risk to export growth, but an escalation could cause disruptions at key mines.
A major flare-up in violence as the 2016 elections approach would deter investment.
|e/f = BMI estimate/forecast. Source: National Sources|
|Nominal GDP, USDbn||32.7||37.9||43.6||50.7|
|Real GDP growth, % y-o-y||8.5||9.5||8.6||8.9|
|Consumer price inflation, % y-o-y, eop||1.1||1.0||1.7||2.5|
|Exchange rate CDF/USD, eop||919.75||911.00||931.63||940.95|
|Budget balance, % of GDP||4.8||-1.2||-3.2||-3.2|
|Current account balance, % of GDP||-9.3||-9.6||-8.7||-7.7|