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PESA Editorial on the DRC: 2H2022/23

PESA Editorial on the DRC: 2H2022/23

The DRC’s exports have continued recovering from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports continued recovering to USD 23.5 billion in 2021. The DRC has a concentrated export profile and earnings from copper have continued increasing to USD 12.3 billion (approx. 52.4% of total exports) in 2021. Other top exports from DRC include inorganic chemicals and miscellaneous nonferrous metals. These exports contributed USD 7.6 billion (approx. 32.1% of total exports). The DRC’s export earnings from inorganic chemicals have continued increasing to USD 4.0 billion in 2021; and earnings from miscellaneous nonferrous metals have continued increasing to USD 3.5 billion in the same period. The DRC’s trade surplus continued widening from the historical medium-term average of USD 5.6 billion for 2018 to 2020, to USD 10.3 billion in 2021.

PESA Editorial on the DRC: 2H2022/23
PESA Editorial on the DRC: 2H2022/23

Total merchandise export earnings have continued increasing which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). The DRC’s FDI inflows increased to USD 1.9 billion in 2021. Hence, the DRC’s FDI stock has been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 25.7 billion for 2018 to 2020 to USD 29.1 billion in 2021. This bodes very well for the DRC as a country that is aiming to attract more foreign investment to develop and diversify its economy away from the reliance on copper exports. This signifies the many economic opportunities across various sectors, including those that have traditionally attracted foreign capital in the economy.

PESA Editorial on the DRC: 2H2022/23
PESA Editorial on the DRC: 2H2022/23

Remittances receipts have been volatile over the period. Personal remittances received have begun recovering from COVID-19 despite being below the annual average of USD 1.7 billion for 2018 to 2020, to USD 1.3 billion in 2021. Personal remittance payments to foreign nationals have continued moderating since the COVID-19 pandemic from an annual average of USD 888.1 million for 2018 to 2020, to USD 730.6 million in 2021. The DRC has had net remittance inflows (net remittance receipts from the diaspora) which decreased to USD 600.3 million in 2021. This has affected the current account balance and strength of the CDF over the period.

PESA Editorial on the DRC: 2H2022/23
PESA Editorial on the DRC: 2H2022/23

The CDF has continued depreciating. In nominal terms, the CDF depreciated by an annual average of -14.0% against the USD for 2018 to 2020. The CDF depreciated by -26.4% to an annual average of CDF 1,988.1 per USD in 2021. The DRC’s current account deficit narrowed below the historical medium-term average. In 2022, the DRC realised a current account surplus that continued widening from the historical medium-term average. In particular, DRC has benefited from the higher copper prices which started depreciating by -2.4% to an annual average of USD 9,097.2 per MT in 2022 (2021: +50.9%; USD 9,317.4 per MT). This is also reflected in the projections for DRC’s current account balance.

PESA Editorial on the DRC: 2H2022/23
PESA Editorial on the DRC: 2H2022/23

In 2023, DRC’s current account surplus is projected to continue widening from the historical medium-term average to USD 10.0 million (approx. 0.01% of GDP). In the medium-term from 2024 to 2026, DRC’s current account surplus is projected to continue widening beyond the historical medium-term average, to an annual average of USD 296.3 million (approx. 0.3% of GDP). This illustrates a persistent improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia and the global transition from fossil fuels in the case of copper. Copper prices are expected to remain relatively elevated in 2023. This seems unlikely to change in the medium-term due to the global commitments towards net zero by automotive producers who pledged to discontinue production of internal combustion engines by 2030 and 2050 onwards. Therefore, Congolese authorities will have to take advantage of the commodity price boom and invest in further development of the economy and diversification of the country’s exports away from the continued reliance on copper.

The issue of developing and diversifying the Congolese economy remains an elusive obstacle for the country. The DRC has a significant potential to grow its exports from inorganic chemicals and miscellaneous nonferrous metals. These represent the highest growth potential towards diversifying the DRC’s economy and export earnings. Apart from this, DRC should also deepen its integration in the SADC region and increase its intra-regional trade. This will provide an opportunity for DRC’s exports to compete against goods and services of comparable quality from the SADC region. Moreover, DRC can offset the risks with its traditional export markets by increasing its dependence on the SADC region for its exports.

Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

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