REPUBLIC OF CONGO

Caught in a low growth-high debt loop

HIGH RISK for enterprise

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

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GDP	USD10.89bn (World ranking 141, World Bank 2020)
Population	5.5 million (World ranking 116, World Bank 2020)
Form of state	Republic
Head of government	Denis Sassou-Nguesso
Next elections	Presidential 2026

Good natural resource base: oil, forestry and minerals.
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.
Highly urbanized country considering its level of per capita income: 70% of the population living in cities.

High (and partly hidden) debt.
History of political instability.
Despite a new constitution and an electoral system, executive powers are effectively held by the president. This entails inherent risks relating to autocracy and succession.
Widespread poverty and high unemployment.
Relatively weak infrastructure development to support communications, trade and growth.
Dependence on the oil sector. Small manufacturing base.
The business environment is challenging, and private sector development remains weak.

The mining sector as a pivot for the post-Covid economic recovery

The Republic of Congo (Brazzaville) ranks among the top 10 of Africa’s oil producers and is endowed with (mostly untapped) substantial mineral resources. The country’s economy is highly dependent on natural resources (mainly oil production), while agricultural and non-oil service actives still have to be developed. Since the oil-price slump in 2015, the country has been caught in a low-growth and mounting-debt loop. Moreover, the Covid-19 pandemic put a break on the ambitious reform agenda of the government to diversify the economy away from oil. Therefore, oil production is set to drive the economic recovery in the medium term. The recent discovery of an onshore oil field in the Delta de la Cuvette deposit and Chinese investment to build a new crude oil refinery by 2023 –with a capacity of 2.5 million tons per year – have strong potential to boost oil production.

The Congolese economy has been hit hard by the Covid-19 crisis. Economic activity contracted by -8.5% in 2020 as a result of sanitary restrictions to curb the pandemic as well as lower oil prices and production. We forecast economic growth to pick up to +2.2% in 2021, with the normalization of global demand for oil. Nevertheless, the macroeconomic environment over the medium term is likely to be impaired by high debt levels and domestic arrears, low potential growth and limited business confidence.

The Republic of Congo is ranked 180th out of 190th countries in the World Bank’s Doing Business index 2020 and may struggle even harder to attract private investors in the post-Covid environment. Thus, there is a strong need to improve the business environment by making it easier to pay taxes, trade across borders, start a business, get electricity and register property.

Rising external and domestic arrears make debt "unsustainable"

As a member of the Economic and Monetary Community of Central Africa (CEMAC), the Republic of Congo's inflation has been contained and stable over the past years. After having slightly increased to 2.5% in 2020 (from 2.2% in 2019), consumer prices are expected to remain below 3% over the medium term.
The current account deficit significantly deteriorated (-5% of GDP) in 2020 due to pandemic-related imports and weak oil exports. We expect the trade deficit to moderate in 2021 (to -2% of GDP) with the support from recovering global demand. Yet, the financing of the deficit may remain an issue in 2021-2022, taking into account low international reserve levels, weak capital inflows and rising short-term debt repayments.

The Republic of Congo’s public debt burden is one of the heaviest in the region and deemed "unsustainable" by the IMF. In 2019, the IMF approved a three-year ECF arrangement of USD446.7mn under the condition of effective debt restructuring (both domestic and external) and fiscal consolidation. Yet, in a context of a sharp drop in oil revenues, the overall fiscal position deteriorated substantially in 2020 and the public debt ratio reached a peak of around 105% of GDP. The country received debt service relief from official creditors in 2020 and the first half of 2021 under the G20 Debt Service Suspension Initiative. However, restructuring domestic debt and other commercial debt with oil traders is still a work in progress. Restructuring discussions with non-official creditors (one third of public debt is owed to China) need to speed up in 2021 to ensure more visibility for government finances.

Poverty remains a big issue

President Denis Sassou Nguesso, who has been in power since 1997, was reelected for an additional term in March 2021 with more than 88% of the votes. The Republic of Congo is poorly ranked in the Human Development Index (149th) and the Corruption Perception Index (165th). Although opposition is historically weak, the Covid-19 sanitary and economic crisis accentuated general discontent among the population regarding the economic and political situation.

Within the framework of the agreement with the IMF, the government plans to implement some structural reforms to tackle long-lasting issues such as weak institutional capacity and poor governance. For instance, in 2021, the authorities will submit amendments to the anti-corruption law to parliament and finalize the audit of domestic arrears.

Poverty in Congo is striking and widespread, mostly caused by civil wars, poor infrastructure development and weak access to clean water sources or sanitation. Almost 1.5 million people live in unplanned settlements, creating a difficult atmosphere to combat respiratory and parasitic diseases. Although the proportion of the population living below the poverty line decreased between 2005 and 2011( from 51% to 41%), the World Bank finds that the extreme poverty rate has increased from 2016, especially in rural areas, as a result of the decline in oil prices. Enhancing education is also a key challenge for the country to tackle rampant youth unemployment (23%). - April 2021.

Trade structure by destination/origin

(% of total, annual 2020)

Exports	Rank	Imports
China 50.0%	1	19.5% China
United Arab Emirates 13.5%	2	11.7% France
Vietnam 4.6%	3	5.8% Angola
Spain 4.1%	4	5.7% Belgium
Saudi Arabia 4.0%	5	4.1% Russian Federation

Trade structure by product

(% of total, annual 2020)

Exports	Rank	Imports
Petroleum, petroleum products and related materials 56.2%	1	11.7% Other transport equipment
Non-ferrous metals 24.0%	2	8.2% Cereals and cereal preparations
Other transport equipment 6.1%	3	6.9% Meat and meat preparations
Cork and wood 5.5%	4	6.5% Other industrial machinery and parts
Metalliferous ores and metal scrap 0.9%	5	4.5% Road vehicles