Country Report Congo (Democratic Republic) June 2009

Outlook for 2009-10

The Economist Intelligence Unit expects the president, Joseph Kabila, to remain in power throughout the forecast period. Political-ethnic conflict is likely to continue in the east of the country. The government's economic policy priority is to respond appropriately to the world economic downturn, which has had a deep impact on the national economy. Agriculture will be the main source of growth in 2009, as mining, construction and, to a lesser extent, telecommun-ications falter, although we expect construction and mining activity to begin to pick up in 2010. Overall, we expect real GDP growth of 3-5% in 2009-10. Average inflation is forecast to rise to 25% in 2009, falling back to 15% in 2010.

The political scene

The joint military operation between Rwandan and Congolese forces in January-February has had mixed results. Diplomatic relations are to be restored and a troublesome Tutsi group has agreed to end its armed rebellion. On the other hand, a Hutu rebel group has sharpened its attacks on civilians and MrKabila has made an enemy of a political ally. Ugandan troops have continued to battle with the Lord's Resistance Army in the north-eastern Democratic Republic of Congo (DRC). The government has accused Angola of extracting oil from beneath Congolese territorial waters.

Economic policy

A revised budget for 2009 is in preparation to take account of sharply lower revenue due to the downturn in mining. Emergency funds from the IMF have been used by the Central Bank to buy Congolese francs in a bid to prop up the currency, mop up liquidity and contain inflation. In an accompanying fiscal measure, the government has temporarily frozen non-priority spending and halved operational spending. The IMF has praised the government for co-ordinating policies, but the infrastructure-for-minerals dealnow scaled back to US$6bnwith China remains an obstacle to a new PRGF and HIPC debt relief. Despite that, the government is undertaking a similar project with South Korea.

The domestic economy

The Congolese franc fell to FC850:US$1 in March, mainly owing to weak domestic output and exports. Partly as a consequence, year-on-year inflation rose to 49.5% in March. The government is giving conflicting messages about the last remaining contract reviews. Copper production has begun at Tenke Fungurume, the DRC's richest copper and cobalt deposit.

Foreign trade and payments

Foreign-exchange reserves are said to have fallen as low as US$10m in March, before the IMF made a US$200m cash injection. Further emergency funding of US$625m may be available.

This report covers the following industry codes:
SIC Code: 39;49;10
NAICS Code: 31;22;212