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Thematic analysis: Structural transformation and natural resources

Authors: Nouridine Kane Dia, Ginette Mondongou Camara

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  • Lower oil production – the economy’s main driver – and weaker domestic demand caused growth to weaken to 3.4% in 2013.
  • Structural and social reforms have made progress but not fast enough for Congo to reach its goals of economic transformation.
  • Although the country is rich in natural resources, which give it a substantial comparative advantage in integration into global value chains (GVCs), Congo’s role in international production networks is mainly confined to the export of primary inputs because of substantial structural obstacles.

Congo’s performance and economic outlook remain generally satisfactory, but structural change is still a major challenge. Real gross domestic product (GPD) growth fell to 3.4% in 2013, compared to 3.8% in 2012, as a result of falling oil production due to ageing oil wells. Even so, GDP growth ought to be 6.1% in 2014 and 6.5% in 2015. This macroeconomic outlook is supported by continuing state investment, the entry into production of mines, and the vigour of the non-oilsector. Inflation, thought to be 2.9% in 2013, should stay below the regional convergence level of 3% until 2015, thanks to a careful monetary and fiscal policy. The budget and the current account were in surplus in 2013, at 12.1% and 4.9% respectively, and should consolidate in 2014-15. But the biggest challenge is still that of transforming the economy with a view to enhancing significantly the impact of growth on social indicators.

Not only has growth been inadequate over recent years and not inclusive enough to greatly reduce poverty, there has been no deep structural change in the economy. Though poverty fell from 50.7% in 2005 to 46.5% in 2011, it is still high for a medium-income country. Unemployment too is still high, especially among young people aged from 15 to 29, for whom it reaches 25%. A speeding up of the reform programme, particularly in key areas such as the private investment environment, skills acquisition and infrastructure as well as managing public finances, is crucial for meeting these challenges. Moreover, these reforms are vital if Congo is to play a bigger part in GVCs, a role that is currently limited despite the country’s major assets.

Apart from oil and sugar, Congo has not been very active in GVCs. The country’s main activity in GVCs has been mostly confined to exporting primary inputs. Finished goods, mainly refined oil products, account for no more than 5% of total exports. With respect to forestry, where there is an undoubted comparative advantage, the share of timber production with high added value stands at just 3%. Congo’s integration into GVCs runs up against failing infrastructure in terms of decent transport and availability of energy; the lack of a qualified workforce; the lagging technological and productive capacity of small and medium-sized enterprises (SMEs) and an uncongenial business climate. To remove these obstacles, the government, through its National Development Plan (NDP) 2012-16, is stressing: i) increasing infrastructure investment and skills acquisition; ii) improving the business climate; iii) improving access to credit for SMEs; iv) setting up special economic zones (SEZs); and v) strengthening regional integration.

Table 1: Macroeconomic indicators

 20122013(e)2014(p)2015(p)
Real GDP growth3.83.46.16.5
Real GDP per capita growth1.10.73.43.8
CPI inflation4.72.92.52.5
Budget balance % GDP15.312.110.512.1
Current account balance % GDP-1.34.94.22

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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