Previous Quarterly Editions
Expropriation Risk: 68 68 68 69 ►Political Violence Risk:59 60 59 57 ▼Terrorism Risk:35 35 35 35 ►Exchange Transfer and Trade Sanction Risk: 55 73 73 73 ►Sovereign Default Risk:83 83 83 83 ►
TREND ►
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Low
Cost-of-living protest risk in 2023*Wage protest: -Food/fuel policy protests: -
*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
The economy is expected to return to almost 2% positive growth in 2022, with the potential to average 4.1% over 2023-24 period, after a 2.2% and a 10% contraction in 2021 and 2020 respectively. The positive outlook is largely down to an increase in oil production and the boost in the global oil price in 2022 that positively affected the hydrocarbon sector, which accounts for about 42% of GDP, 80% of total exports, and 60% of domestic revenue for the republic.
The government estimated the country’s headline inflation to have averaged 2.8% in 2022 and it would hit 3% in 2023, contrary to an IMF estimate inflation would average 3.5% in 2022 before dropping slightly to 3.3% in 2023. While Congo’s inflation is among the lowest in the six-nation Central African Economic and Monetary Community (CEMAC), prices of fuel and many staple foods remain high, with prices of some items increasing by over 10%.
The government introduced a number of measures to combat the high food prices, which were rising beyond the reach of many households in a country where the poverty rate of living below USD2.15 a day rose from 33% in 2014 to 52% in 2021, according to the World Bank. Some of the measures included subsidies for fuel imports, the exemption of imported products from customs duties in October 2022 and the December 2022 freezing of most staple goods prices. However, these measures did not make much of a difference on the ground as traders continue to hike prices, taking advantage of the shortages of many imported items.
Last year, oil sector workers threatened to go on a hunger strike and halt work at refineries, oil terminals, and onshore and offshore bases over low pay and other demands including salary adjustment to inflation and compensation for the pandemic shutdown. The government held talks with the workers to avert a shutdown of the sector and promised to meet some of their demands. Under Congo’s three-year Extended Credit Facility with the IMF, the government is required to adopt strong fiscal consolidation measures during 2023, which include the complete phase-out of the new fuel subsidy, while undertaking a gradual fuel price deregulation. The removal of fuel
subsidy is likely to add further pressure on the cost of living, which could raise the prospects of further strikes in the public and private sectors and a sudden outburst of violent protests against traders.
On the political side, following the re-election of President Sassou Nguesso in 2021, protests and political violence have subsided, resulting in a significant improvement in the country’s political stability. In the medium term, the outlook for political stability is likely to remain positive.
Expropriation risk in the Republic is moderate. The risk is largely concentrated in the extractive sector on which the government is heavily dependent and has the tendency unilaterally to revise contractual arrangements. However, cases of expropriation have been rare.
The improvement in public finances due to the 2022 oil windfall could ease near-term pressure on the government to go after companies with arbitrary demands of payment of backdated tax arrears.
TREND ▼
In power since 1997, President Nguesso was re-elected for another five-year term after a landslide victory in the first round of the March 2021 presidential election. At the legislative elections in July 2022, the President’s ruling Congolese Labour Party (known as ‘PCT’) secured a parliamentary majority, winning 111 out of the 151 seats.
In the medium term, there are no foreseeable political threats to the president. Political violence has plummeted following the imprisonment of General Jean-Marie Michel Mokoko and the signing of the ceasefire and cessation of hostilities agreement in December 2017 between the government and Frédéric Bintsamou, alias ‘Pastor Ntumi,’ who waged a rebellion to oust Nguesso from power.
Since the agreement was signed, armed attacks by Ninja rebels have ceased, leading to the reopening of the road between the capital Brazzaville and Pointe-Noire, the port city and hub of the country’s oil industry. Key to preventing a return to hostilities are the successful implementation and execution of the ‘reintegration’ component of the disarmament, demobilization, and reintegration programme.
There are a few instances of attacks by pirates both offshore and in the Pointe-Noire anchorage area. No piracy incident was reported in 2022, while only one incident took place in 2021, when three intruders boarded a Cyprus-flagged container ship. Anchored container ships face greater risk from robbers seeking to steal ships’ stores.
There are no emerging sanction risks at present. As a CEMAC member, the republic’s foreign exchange regulation is directed by the bloc’s Bank of Central African States.
A new foreign currency exchange regulation came into effect in 2019 requiring companies to seek BCEAO authorisation before opening offshore current accounts. Firms must also renew permission to maintain foreign currency accounts in the CEMAC area every two years. The new regulation has increased the period for repatriation of exportation proceeds above five million Central African francs (approximately USD8,312) into a certified commercial bank from 30 days to within 150 days.
However, the Central Bank has granted several concessions to resident companies operating in the mining and hydrocarbons sectors, significantly reducing the risks around capital controls and exchange transfers for the extractive industry, a major revenue earner. Extractive companies can maintain foreign currency accounts within and outside the CEMAC area and transfer salaries of expatriate workers from onshore foreign currency accounts abroad. They can also make payments to subcontractors operating in the CEMAC zone in foreign currency.
Public debt fell from 113% of GDP in 2020 to 102% in 2021, with plans to bring down public debt from 99% to 71% of GDP between 2022 and 2027. The gradual reduction has come from cuts in public expenditure. Even so, this is still above the CEMAC’s 70% debt-to-GDP ratio limit.
Recent debt restructuring agreements with private firms and with China, as well as high oil prices and improved debt management, have restored the sustainability of country’s public debt, according to the IMF. The republic’s three-year Extended Credit Facility with the IMF aims to help policies to diversify the economy and strengthen management of public finances, governance, and financial sector reforms.
Overall, the republic has a poor credit track record, having twice defaulted on its outstanding USD363 million Eurobond. In 2016, administrative issues reportedly caused the government to miss a scheduled coupon payment, which was subsequently paid two months late. Also, a legal order filed by a local construction company intercepted a USD21 million coupon from reaching bondholders. The firm claimed the government owed it USD1 billion in arrears dating back to 1992.
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