Congo (Democratic Republic of)

Economic growth based on the extractive sector

In 2023, growth remained relatively resilient, despite the deterioration in the security and humanitarian situation in the east and in the terms of trade. The economy is essentially based on minerals (25% of GDP), whose prices have fallen. Although growth will continue to slow in 2024 due to the conflict in the east of the country, it will still remain high, underpinned by copper and cobalt production and exports. The expansion of the Kamoa-Kakula copper complex, co-owned by Canada’s Ivanhoe Mines, China’s Zijin and the Congolese government, will continue in the south of the country. Once phase 3 is completed at the end of the year, production will be exported along the Lobito corridor to the Atlantic. The rail project crossing Zambia, the DRC and Angola, financially supported by the United States, the European Union and the African Development Bank, consists of renovating the existing 1,300km of Angolan rails and building an additional 800km in the DRC and Zambia. The development of this infrastructure will enhance the attractiveness of the region by improving ocean access and regional connectivity, boosting the mining sector and exports. Construction is benefiting from this project, stimulating non-extractive growth which, with services, accounts for 35% of GDP. However, non-mineral investment will continue to be limited by the poor business environment, affected by endemic corruption and security tensions. Private consumption will remain hampered by the humanitarian crisis resulting from the conflict in the east of the country, which is causing the massacre of civilians and large-scale population displacements. It will also be limited by double-digit inflation, which surged in 2023 on the back of high food prices and a depreciating currency. The weakening of the Congolese franc will be more moderate in 2024 thanks to the recovery in mineral prices, which will help to replenish reserves to more than 2.5 months of imports and limit inflation. The transmission of monetary tightening, albeit partial, will also have an impact on prices, after the Central Bank of Congo sharply hiked its key rate from 11% to 25% in October 2023.

International project loans and mining FDI finance the current account deficit

The durably moderate public deficit widened slightly in 2023, burdened by election and security spending, as well as revenue underperformance linked to the fall in cobalt prices and lower taxes on windfall profits. This has affected fiscal consolidation efforts under the IMF and its three-year USD 1.5 billion Extended Credit Facility, which expires in mid-2024 and is likely to be followed up. The 2024 budget will prioritise spending, notably by ending fuel subsidies for the mining sector and paying arrears to suppliers, while election spending will disappear. However, spending will continue to be hampered by public sector salaries, particularly for the army (28% of revenue and 4% of GDP) and by the increase in other military and security expenditure (7% of revenue and 1% of GDP), following the resurgence of tensions in the east and the gradual departure of MUNESCO peacekeepers. Large mining revenues (6% of GDP and 40% of government revenues), supported by the rebound in mining prices, will help stabilise the deficit. Furthermore, in January 2024, the country renegotiated the contract signed with China in 2008 for the exploitation of its copper and cobalt mines. In fifteen years, Chinese companies have paid around a third of the USD 3 billion initially promised. This initial amount has been increased to USD 7 billion, the balance of which will be allocated to infrastructure, particularly roads, over the next twenty years. The Sino-Congolese mining joint venture Sicomines will henceforth pay a 1.2% royalty. The deficit will essentially be financed externally, notably via project loans (1.5% of GDP). The low public debt ratio will continue to fall thanks to economic growth. Its external share (70% of the total) is evenly split between multilateral (IMF, World Bank) and bilateral debt, with Chinese debt representing 6% of GDP in 2022. Domestic debt consists mainly of arrears (6% of GDP).

In 2023, the current account deficit was wide as the country faced terms of trade difficulties. In 2024, imports of infrastructure-related capital goods (47% of imports) and food products will remain high. However, the trade surplus will rise thanks to increased mining exports (98% of exports and 39% of GDP), which will reduce the current account deficit. On the other hand, the structural deficit in services will persist, due to the use of foreign commercial and transport services linked to mining and construction. The positive balance of secondary revenues should improve in 2024, as the DRC, which benefits from large remittances from its diaspora (3% of GDP), could receive more international aid (1.5% of GDP) as the humanitarian crisis worsens. Repatriation of profits by foreign companies will increase, in line with the expansion of the extractive sector. Ultimately, the current account deficit will be financed by international project loans and FDI in the mining sector.

Heightened security tensions and a deteriorating humanitarian situation

The incumbent President, Félix Tshisekedi, was re-elected with 73% of the vote in the general elections held on 20 December 2023. The quadruple ballot, comprising presidential, legislative, provincial and local elections, was marked by a moderate turnout (43%) and numerous logistical problems. Furthermore, opponents denounced a "multitude of irregularities". A request to annul the election was rejected by the Constitutional Court, validating Tshisekedi's re-election for a second five-year term. The president's party, the Union for Democracy and Social Progress (UDPS), came out on top in the legislative elections (winning 69 of the 477 seats allocated), but will need to form a broader coalition to secure an absolute majority in parliament. The National Assembly has a total of 500 seats, the 23 not allocated corresponding to provinces where voting did not take place because of the insecurity. The conflict in the east of the country mainly affects the provinces of Ituri and North and South Kivu, where armed rebel groups are fighting for control of minerals (cobalt, coltan, gold). Since October 2023, fighting has intensified between the M23 (March 23 Movement) and the Armed Forces of the Democratic Republic of Congo (FARDC), supported by local armed militias known as "patriots". Supported by UN documents, the DRC accuses neighbouring Rwanda of supporting the M23 rebels, and tensions between the two countries will remain high in 2024. To address the upsurge in violence and the risk of a regional powder keg, the UN peacekeeping mission, MONUSCO, has been extended for a further year. The peacekeepers will gradually retreat before their total withdrawal in December 2024. The DRC is now counting on the deployment of troops from the Southern African Development Community (SADC) to neutralise the armed groups, thanks to a more offensive mandate than that of MONUSCO. The repercussions of the conflict will continue to weigh heavily on the population: 6.9 million internally displaced persons, a worsening health situation (cholera epidemic) and an increased risk of malnutrition, with 25 million people - a quarter of the population - currently suffering from food insecurity. It also has to contend with the risk of natural disasters: in October 2023 and January 2024, overflows of the Congo River affected more than 300,000 households. Given this precarious security and social context, and its limited budgetary resources, the DRC will remain dependent on international aid.

Last updated: March 2024