Thanks to oil production, the Republic of Congo belongs to the group of countries with a lower middle income, yet a large part of the population lives in poverty. The country’s economy is very poorly diversified, currently completely dependent on the oil industry and services for this industry. In the medium term, Congo will remain an exporter of commodities (mainly oil and wood), its economy will therefore fluctuate cyclically depending on price fluctuations on world markets. In addition, the country faces many serious problems: a neglected infrastructure, a very unfavorable investment and business climate (police checks in private companies, extortion, bribes, threats), massive corruption, poor business management and an inefficient state administration that hinders its economic development. The government is aware of the economy’s unhealthy dependence on oil production. It implemented the 2012-2016 national development plan aimed at economic recovery and diversification, and began preparing the Congo vision 2025 plan, which aims to bring the country into the category of “new” economies and reduce the country’s one-sided dependence on oil and timber extraction. Considerable funds are invested in the renewal of infrastructure (airports, roads) and the construction of new energy sources, houses and apartments. In accordance with the plan, the government is trying to attract foreign investors to the country, developing special economic zones. The telecommunications and banking sectors are developing rapidly. Congo’s economic outlook will be marked by the implementation of the 2018-22 National Development Plan and reforms under the IMF’s Extended Credit Facility. At the beginning of 2020, the autonomous port of Pointe-Noire modernized its facilities, which allowed it to become the container shipping hub of the region during the pandemic. Industry accounts for 51% of GDP, the industrial and manufacturing sector in Congo remains weak.
According to cheeroutdoor.com, the most important industries (besides oil) are mining and wood processing, cement production, palm oil processing and food processing. Sugar, flour, cigarettes, soft drinks, beer are produced locally and in small establishments. The backbone of the industry is oil extraction, which is the main source of foreign exchange and state budget income – it accounts for approximately 60% of GDP and 90% of the value of exports. Logging is Congo’s second most important source of foreign exchange. Primeval forests cover 60% of the country’s surface, 2 million ha are mineable. Together with fishing, agriculture is an underdeveloped and long-term neglected sector of the economy. The trade and service sector is developing rapidly and today already accounts for about 40% of GDP. The largest part of the service sector (besides services for the oil sector) remains transport services and logistics for regional trade. The banking sector and telecommunications underwent a major reform, which is developing rapidly. Congo imports practically everything, especially equipment for the oil and mining industry, machinery and equipment for the processing industry and agriculture, electrical equipment, construction machinery, construction materials, means of transport, construction steel, food, chemicals, medicine, fuel.
Pointer
2019
2020
2021
2022
2023
GDP growth (%)
-3.5
-9.3
-1.2
1.9
2.4
GDP/population (USD/PPP)
3,840.00
3,620.00
3,600.00
3,730.00
3,820.0
Inflation (%)
2.2
2.5
2
2.5
2.7
Unemployment (%)
20.6
22.8
ON
ON
ON
Export of goods (billion USD)
7.4
5.4
7.3
8.1
8.4
Import of goods (billion USD)
5.7
4.3
4.8
5.7
6.1
Trade Balance (Billion USD)
3.2
3.1
3.7
3.9
3.9
Industrial production (% change)
ON
ON
ON
ON
ON
Population (millions)
5.4
5.5
5.7
5.8
5.9
Competitiveness
ON
ON
ON
ON
ON
OECD export risk
07.VII
07.VII
07.VII
ON
ON
Source: EIU, OECD, IMD
Public finance and state budget
Public finance
2021
State budget balance (% of GDP)
0.9
Public debt (% of GDP)
99.4
Current account balance (billion USD)
0.5
Taxes
2022
AFTER
30%
F.O
10-50%
VAT
18%
After a dip in 2020, we expect government revenues to increase due to the rise in oil prices. However, as oil production remains below the pre-pandemic peak while the non-oil economy remains weak, fiscal revenue will remain low as a share of GDP in 2021-22. The government is trying to raise tax revenues under the ECF program (by simplifying tax laws, reducing tax exemptions, implementing tax administration reforms and collecting tax arrears). Spending as a share of GDP is projected to increase in 2021, reflecting election-related spending and continued corona-related support. Health care spending will remain elevated and some subsidy payments (to soften the blow of falling economic activity) will continue. Debt service (including payments to private creditors and official creditors outside the G20 group) will remain a significant part of spending,
In 2022, we expect spending to moderate slightly relative to GDP, with health and social support measures related to the pandemic being reduced. We expect the fiscal deficit to narrow to 1.7% of GDP in 2021 (from an estimated 3.6% of GDP in 2020). In 2022, with further revenue growth and spending easing, the fiscal deficit will be reduced to 0.5% of GDP. As a result, we expect the public debt position to decline to 81.5% of GDP at the end of 2021 (from an estimated 91.1% of GDP at the end of 2020), before falling further to 74.5% of GDP at the end of 2022.
Banking system
The banking system of the Republic of Congo is controlled by the joint Central Bank of the Central African Countries – BEAC, based in Yaoundé, Cameroon. It oversees the activities of banks in other member countries of the Central African integration group UDEAC (CEMAC currency zone). The CFA franc can circulate freely among the six CEMAC member countries and can be exchanged for other world currencies through the banking system based on commercial documents.
The BEAC Central Bank issues currency and oversees liquidity within the Central African Monetary Zone through rediscount rates and control of member money markets. The banking sector has undergone a major reconstruction since 2000, which consisted in the privatization of the vast majority of commercial banks.
Main commercial banks: • Afriland Firts Bank • Credit du Congo (Morocco) • BGFI Bank Congo • Banque Commerciale Internationale • Ecobank Congo • UBA Bank • La Congolaise de Banque • Banque congolaise de l´habitat (BCH) • Société Générale • Banque Postale du Congo (BPC)
Banks are gradually expanding the range of banking products (letters of credit, commercial loans) and accepting more and more incentives for providing loans for medium-term investments by private entities. However, modern banking products (electronic banking) are not yet widespread.
Tax system
The Congolese tax system is slowly adapting to the unified system within the CEMAC countries, but it is still very complicated and, thanks to high corruption, tax evasion is very common. There are two extremes, either the business pays no taxes thanks to bribes, or it pays excessively high taxes. The main sources of tax revenue are oil companies and freight forwarders. The majority of the population pay no taxes due to the large scale of the informal sector.
The Congolese tax system consists of the following basic direct and indirect taxes and employee social insurance:
Personal Income Tax – is progressive according to income in the 10-50% range,
Corporate tax – 30% of profit, investors have a special tax regime for the first three years of business (see below)
Value Added Tax (VAT) – 18.0%, 10% VAT applies to bottled water, cement, sugar and chickens originating in the Republic of Congo, 0% VAT applies to milk, cereals, fruit and vegetables, drugs and fertilizers of Congolese origin.
Consumption tax of 25% on luxury goods, 20% on beer
Social insurance (Social Security Fund) – 22.3% of the salary (+ another 4% paid by the employee), includes accident insurance in the amount of 2-4%.
Business is burdened by a number of other payments and levies (real estate tax 15%, business license tax, withholding tax, transfer tax 1%, construction tax, rental tax, environmental tax, vehicle tax, various registration fees etc..).
