Population 4.862 million
GDP 2.168 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
3.0 |
3.3 |
3.8 |
1.8 |
|
Inflation (yearly average) (%)
|
1.5 |
1.2 |
5.0 |
8.0 |
|
Budget balance (% GDP) *
|
-7.7 |
-5.9 |
-5.3 |
-5.8 |
|
Current account balance (% GDP)
|
-10.3 |
-8.7 |
-7.4 |
-7.1 |
|
Public debt (% GDP)
|
39.8 |
37.5 |
36.5 |
32.4 |
| (e) Estimate (f) Forecast * grants excluded | ||||
STRENGTHS
- Agricultural potential, forestry and mining wealth (diamonds, gold and uranium)
- Support from the IMF, debt reduction obtained under the HIPC and MDRI initiatives
WEAKNESSES
- Economy vulnerable to internal and external shocks
- Poor transport infrastructure and limited energy production capacity
- Geographic isolation
- Unstable political and security situation
Risk assessment
A poorly diversified economy dependent on foreign investment and aid
The country’s production consists mainly of raw materials. Agriculture, including cotton production, and livestock farming account for over half of GDP and remain highly sensitive to climatic vagaries. Mining production, particularly of diamonds and gold (pending the production start up of the big Passendro gold mine project in 2014), is still very active. Public investment, in construction and telecommunications, and private investment, in the natural resources and mining sectors, are driving growth. These sectors are expected to continue to sustain activity in 2013. However, political instability has disrupted sowing and roadblocks, despite the January 2013 peace agreement, have affected transport, trade and the flow of business. In addition, insecurity is curbing investment development: some diamond mines are in regions poorly controlled by the State and uranium mines have been attacked by dissident groups (Areva was forced to close its Bakouma mine in 2012). Finally, the coup d’état in March 2013 means the country is threatened with the suspension of aid from donors. In this context, growth, which is heavily dependent on the level of foreign investment and aid, is likely to slow considerably in 2013.
Already fuelled by the ending of petrol price subsidies in 2012, inflationary pressures are likely to increase in 2013 on the back of rising food prices.
Many challenges ahead
A 3-year $63mn Extended Credit Facility was concluded with the IMF in 2012. The Fund noted that some progress had been made in the management of public finances after the fiscal slippage which occurred during the 2010-11 electoral period. The IMF had for 2 years refused to provide assistance due to considerable opacity and delay in the holding of the elections. The government had hoped to access necessary funds to facilitate implementation of the priorities set out in the Poverty Reduction Strategy Paper (enhancement of peace and governance, strengthening of state capacity, reactivation of the economy, regional integration and development of human capital and basic social services). But, following the coup d’état, an interruption in foreign aid, even a temporary one, cannot now be ruled out. Meanwhile, structural fiscal problems (primary sector hardly taxed, relatively low government revenues) are not about to go away. Other challenges remain: the opacity of certain expenditures, shortcomings in the business environment, etc.…. The country’s political and economic weaknesses will keep the risk of non-repayment of the different loans high. Moreover, there is still a substantial current account deficit. Exports of timber and diamonds (the two main export products) should prove resilient, but the oil bill is very high and imports of capital goods, associated with the investment in the mining sector and public investment, as well as services linked to imports, have risen substantially. Purchases abroad are nonetheless expected to stabilise in 2013, but the current transfers surplus looks set to fall, due to the probable decline in foreign aid.
An unstable political and security situation
The Seleka rebel group, which had seized key towns in the north and centre of the country in December 2012, had agreed to negotiate a solution to the crisis with the authorities. A peace agreement had, therefore, been concluded in January 2013 at Libreville, whereby President Bozizé was expected to stay in power until the end of his term (2016), a new prime minister (put forward by the civilian and rebel opposition) was expected to head a national unity government and legislative elections were due to be held at the beginning of 2014. This truce did not last and it only took a few days in March 2013 for the rebels to break through the last checkpoints protecting the capital, Bangui, and oust the head of state. The Seleka leader, who proclaimed himself President, promised to retain the prime minister, appointed a month earlier, and to organise elections in three years’ time. The collapse of the regime has opened a new period of political uncertainty. One major issue is how the army and the rebel forces will manage to co-exist, and whether the rebel group, made up of a heterogeneous assortment of armed fighters from different movements, will continue to stick together. Whether he stays in power will depend in part on the reaction of the country’s regional partners and donors. The African Union has suspended the Central African Republic’s membership of its organisation, but the major powers appear to be adopting a more conciliatory attitude for the moment.
