Congo

major macro economic indicators

(e): Estimate (f): Forecast *excluding debts of public companies and not guaranteed SNPC debts

Risk assessment

A moderate recovery supported by hydrocarbons

After seven consecutive years (2015-2021) of economic contraction triggered by the collapse of oil prices in 2014-2016, the recovery of oil prices is encouraging increased production and investment in hydrocarbons. While the country refined only 10% of its production in 2020, a second refinery, financed by the Chinese company Beijing Fortune Dingheng, should open in 2023 near the coastal economic capital. The Italian hydrocarbon company Eni brought on stream new oil wells in 2022, launched explorations and built liquefied natural gas (LNG) terminals which are expected to boost exports to 4.5 billion cubic metres by 2024-25. These projects should help the sector diversify somewhat. In the short term, however, growth is limited by lacklustre growth in other sectors, particularly industry, despite the country’s rich natural resources. Some diversification investments are flowing into the special economic zones (Brazzaville, Ignié, Ouesso, Oyo, Pointe-Noire). A public-private memorandum of understanding with the developer Arise IIP was signed in June 2022. The partner should invest €150 million a mineral port and wood processing plant in Pointe-Noire. The household standard of living is already low (51% of the population lived in extreme poverty in 2021) and households are not expected to recover in 2023 the purchasing power lost to inflation, fuelled by food imports (80% of requirements) and under-compensated by an oil boom poor in employment. Constrained by over-indebtedness, public consumption, which has plummeted in recent years, is not expected to rebound significantly, while acute deficiencies persist in health, education and transport infrastructures.

Fiscal respite, but high debt undermines fiscal efforts

Plagued by debt-related difficulties, the country is taking advantage of the favourable situation generated by higher oil prices to restore its public finances and the confidence of creditors. Oil royalties, which account for more than two-thirds of budget revenue, are therefore a major contributor to this improvement. After an initial setback in 2021, the country's authorities agreed with the IMF in January 2022 on an extended credit facility for USD 455 million. The IMF programme accompanies a programme of fiscal consolidation (elimination of tax exemptions for oil companies), expenditure efficiency (reduction of subsidies to state-owned enterprises, moderation of the public wage bill) and anti-corruption measures (legislation was enacted in March 2022). In the long term, these reforms aim to redistribute the oil rent and reduce operating expenses. The reforms, approved by the IMF, aim to improve the transparency of public financing (domestic arrears, Chinese loans, oil contracts). In addition, the IMF encourages the authorities to improve transparency in public finances (domestic arrears, Chinese loans, oil contracts). The resumption of negotiations for a new programme was facilitated by a second restructuring of China's loans in June 2021. Although public debt is expected to continue to decline, it remains high and keeps the country in a position of over-indebtedness.

By continuing to follow energy prices, the current account surplus should remain largely positive in 2023. The main explanation is the surplus in the balance of trade in goods (45% of GDP), composed mainly of oil and copper. However, as storm clouds gather over the world’s economy in 2023, it will decline slightly with weaker terms of trade relative to 2022, albeit mitigated in volume by the start of gas exports. Oil-related services and repatriation of foreign investment income will keep deficits in the balance of services and primary income on the rise since 2021. The balance of transfers, whether in public aid or expatriate remittances, will have a marginal impact on the current account.

A president manoeuvring to renew his external support

Denis Sassou Nguesso has been head of state since 1979, barring a hiatus between 1992 and 1997. He won the Presidential election again in March 2021, obtaining more than 88% of the vote. His party, the Congolese Labour Party (PCT), consolidated its majority against a marginalised opposition in the July 2022 legislative elections. The leader's family is under investigation for embezzlement of public funds from oil revenues (Panama Papers in 2016, seizure of assets in France in 2022). The discrepancy between the territory's wealth in resources and the population's standard of living (53% of the population lived in extreme poverty in 2021) has sparked criticism of the lack of contract transparency with the majors. Tasked with the Presidency of OPEC in 2022 (and an OPEC member since 2018), the third-largest oil exporter in sub-Saharan Africa is emancipating itself from the dialogue with Western governments. Adopting a neutral position at the United Nations in the face of the war in Ukraine, Brazzaville is maintaining a certain closeness with Moscow. Russian Foreign Minister Sergei Lavrov visited the country in July 2022. Several cooperation deals were also inked between the two countries in September of 2022, while discussions are ongoing on the rollout by a Russian company of the Pointe-Noire-Ignie pipeline project. China also continues to be the country’s main creditor (16% of national debt in 2022) and oil outlet. France remains a privileged economic partner, despite the ongoing French investigations into the President’s ill-gotten gains and his coterie.

Last updated: April 2023