Economic Analysis - Non-Mining Activity Undermined By Political Crisis - NOV 2017

BMI View : The D emocratic R epublic of C ongo ongoing political crisis will undermine economic activity over the coming quarters , a s the lack of needed financing had led to falling imports, rising inflation, and widespread insecurity. Downside risks are growing as the continuation of the crisis could further delay the resumption of needed capital inflows.

Economic activity in the Democratic Republic of Congo (DRC) will remain at multi-year lows in 2017 but rise modestly in 2018. Strong production growth in the mining sector will be the dominant source of growth, led by copper and cobalt. However, we caution that although headline growth will remain positive, conditions outside of the mining sector are nearing recession. Struggling to finance its current account shortfalls and government operations, the DRC faces falling imports, rising inflation, accumulating salary arrears to numerous segments of society and a volatile political environment characterised by disruptive strikes and insecurity.

We maintain our real GDP growth forecast at 2.9% in 2017 based on the strength of the mining industry. However, we have downgraded our forecast for 2018 to 4.2%, from 6.4% previously ( see 'Instability Prolongs Growth Slowdown', June 2). This reflects our views that inflation will be higher and government spending lower than we previously expected, weighing on consumption. Moreover, we caution that downside risks to our forecasts are growing, as the political crisis could extend further in 2018 than we currently anticipate.

Growth Picking Up But Headwinds Are Substantial
DRC - Real GDP Growth, %
f = BMI forecast; Source: UN, BMI

This article is part of our East & Central Africa coverage. To access this article subscribe now or sign up for free trial