Mining Boom Cushions Fiscal Crisis


An iron ore boom is causing growth to pick up in the Republic of the Congo, an oil-dependent economy facing declining energy production. New sources of fiscal revenue will m itigate the impact that declining oil rents will have on the country's finances. Even so, we predict that Congo- Brazzaville's fiscal surplus will decline from 17.9% of GDP in 2011 to just 1.4% in 2017.

On March 4, 2012 a government arms depot exploded in Brazzaville, killing some 200 people and making over 13,000 locals homeless. Recovering from the disaster was costly for the Congolese government, with reconstruction and compensation payouts causing current expenditure to increase by 27.5%. The country's fiscal surplus fell to 2.4% of GDP in 2012, from 17.9% a year earlier.

While BMI expects the country's fiscal health to improve in 2013, we stress that declining oil production will steadily degrades the fiscal balance. Mining sector growth will moderate this trend, but will not reverse it. We predict that the republic's fiscal surplus will fall to just 1.4% of GDP by 2017.

A Gentler Decline
Congo-Brazzaville - Fiscal Surplus, % of GDP

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This article is tagged to:
Sector: Country Risk
Geography: Congo, Congo, Congo, Congo, Congo, Congo

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