Authors : Nouridine Kane Dia, Francis Jony Andrianarison
Lower world oil prices continued seriously to affect the economy in 2016, which shrank by 2.4% in 2016 (after growing by 2.6% in 2015). The fall in the oil price reduced oil sector activity and growth slowed in the non-oil sector, which was itself hit by a decline in public investment. The great dependence on oil underlines the efforts needed to diversify the economy and make it more resilient. Inflation was 4.3% in 2016 and is expected in 2017 and 2018 to remain slightly above the 3% convergence criterion set by the Central African Economic and Monetary Community (CEMAC) for 2017-18. The sharp fall in oil sector revenues produced an overall budget deficit of 15.9% of gross domestic product (GDP) in 2016, despite budget cutbacks, as well as a bigger current account deficit, which grew from 20% to 24.2% of GDP between 2015 and 2016.
The economy should expand by 0.5% in 2017 and then 3.3% in 2018, thanks to a greater output of oil as new wells come on stream, and to better agricultural and cement output. But oil price uncertainty, the government’s narrower margin of manoeuvre in supporting growth, as well as less macroeconomic stability, are major risks. Prospects will also depend on the ability to make orderly and sufficient adjustments to emerge from the crisis, along with speeding up structural reforms to diversify the economy.
Though progress has been made, social indicators are still lower than in other African countries of a similar income level. The United Nations Development Programme (UNDP) Human Development Index ranked Congo 136th out of 188 countries in 2016 with a score of 0.591, slightly better than in 2015. Poverty fell from 50.2% of the population in 2005 to 37% in 2011 but is still higher than the average in similar middle-income countries (MIC). With a Gini inequality coefficient of 0.465, it comes 90th out of 105 countries worldwide, so income inequality and distribution remain big challenges. Unemployment is a major challenge, with 30% of the workforce between 15 and 29 and 19% of women having no job.
Industrialisation has not yet made significant progress in spite of the efforts made over the past decade. The fall in the price of oil reduced its contribution to GDP but it remains the driver of the economy (40% of GDP), with the secondary sector accounting for only 7%. Industry is very undiversified and its exports are composed of only three kinds of products, which made up only 6.5% of total exports in 2016. To boost the growth of industry and entrepreneurship, the government has an ambitious diversification and industrialisation strategy, the 2012-16 national development programme (PND) and the national industrialisation policy paper. The PND includes measures that aim to create good conditions for entrepreneurs and private investment. But results are still poor, and the government must speed up the building of a diversified and more resilient economy.
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