Economic studies
Central African Republic

Central African Republic

Population 4.7 million
GDP per capita 332 US$
E
Country risk assessment
E
Business Climate
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Synthesis

major macro economic indicators

  2014 2015  2016 (f) 2017 (f)
GDP growth (%) 1.0 4.8 4.5 4.7
Inflation (yearly average) (%) 11.6 4.5 4.0 3.5
Budget balance (% GDP) 3.0 -0.6 -4.1 -2.8
Current account balance (% GDP) -5.6 -9.0 -10.1 -9.7
Public debt (% GDP) 51.1 48.5 47.2 41.2

 

(e) Estimate (f) Forecast

STRENGTHS

  • Agriculture potential, silviculture and mineral wealth (diamonds, gold and uranium)
  • Significant international financial support

WEAKNESSES

  • Economy vulnerable to external shocks
  • Poor transport infrastructure and inadequate power production capacity
  • Landlocked
  • Unstable political and security situations, increasing religious tensions
  • Presence of several armed foreign rebel groups (in particular the Ugandan ADF rebels)

RISK ASSESSMENT

Improved macroeconomic context but internal tensions continue to drag down growth

Growth is expected to increase in 2017 with a gradual upturn in exports, following the lifting of the embargo on diamond sales, and in foreign investments. However, these are not likely to return to their levels prior to the 2013 conflict because of the enduring insecurity which is acting to dampen economic activity.

Domestic demand is likely to remain flat given the exile of almost a quarter of the population (1 million people have left the country since the start of the conflict and have yet to return). The arrival in power of a stable government in 2016 could mark the start of a period of transition and could see an increase in agriculture and mining operations. Agricultural production, which accounts for more than half of GDP and employs almost 75% of the population, remains the dominant activity in the Central African economy. Despite the emergency aid granted by the EU and IMF, the country is struggling to recover, as are both private and public investments which are likely to remain marginal in 2017.Inflation is falling but is expected to continue above the 3% target of the Central African Economic and Monetary Community. The slight reduction will probably be due to lower domestic agricultural product prices (thanks to an increase in supply).

 

Public finances and exports driven by international aid

In partnership with the IMF, the new government is going to gradually restart the budget reforms that were interrupted by the 2013 coup d'etat and the ensuing conflict. At the end of July 2016, the IMF approved a three-year aid plan covering around 6% of GDP. On top of this, the international community announced in November 2016 the provision of grants equal to the country’s GDP. The actual delivery of these grants remains uncertain as many allowances are never paid (only 34% of the grants under the Humanitarian Response Plan were paid in 2016). Nevertheless, these should help the country to significantly reduce its public debt.

Revenues should increase slightly thanks to improvements in administration by the tax and customs authorities aimed at maximising the benefits of growing trade flows. Government revenues however are likely to remain too small to pay for all current spending and service the external debt, making the country extremely reliant on international aid. Expenditure should rise, less rapidly, with the desire of the government to focus on a national disarmament plan for the rebel groups.

The current account deficit should fall in 2017, boosted by the partial lifting of the embargo on Central African diamonds. However, any recovery in exports is going to be gradual and will depend on the ability of the government to restore the markets that went into the informal sector with the start of the conflict in 2013. Exports of wood, coffee and cotton (the country’s leading agricultural resources) are expected to continue struggling in the face of the insecurity and the disruptions impacting on the transport and logistics sector. Despite weak domestic demand, imports are likely to continue to rise as oil and gas prices gradually recover.

 
The government’s search for unity remains contingent on the internal conflicts that are seriously undermining the business climate

The presidential and parliamentary elections (held simultaneously on 14 February 2016), concluded with the election of Faustin-Archange Touadéra to office following the validation of the results by the Constitutional Court on 1 March. With the formation of his government, in April 2016, Touadéra demonstrated his desire for a unified republic with the appointment of members of the opposition. The new President did however exclude any representatives of armed groups. This decision could however fan certain tensions, reflecting the growing discontent within the population concerning the government’s inability to defend people against the rebel militias. The government is tied hand and foot by the international embargo on weapons and thus is unable to defend its citizens by forming a Central African army. Whilst talks between the government and the United Nations on lifting this embargo are ongoing, the UNPeacekeepers are tasked with protecting its citizens. The fighting has not in fact ended, as was demonstrated by the skirmish between former Séléka and anti-Balaka militias in the north of the country in October 2016, which resulted in considerable numbers of civilian deaths.

In this context of friction, the business climate is likely to remain unstable and strained. Thus according to the World Bank, the Central African Republic was, in 2016, one of the worst rated countries in terms of government effectiveness, regulatory quality and rule of law.

 

Last update : January 2017

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