Economic studies
Central African Republic

Central African Republic

Population 4.8 million
GDP per capita 494 US$
D
Country risk assessment
E
Business Climate
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Synthesis

major macro economic indicators

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 3.1 0.8 -0.6 3.4
Inflation (yearly average, %) 2.7 2.1 3.3 2.5
Budget balance (% GDP)* 1.4 -3.3 -1.1 -1.2
Current account balance (% GDP)** -5.1 -8.7 -6.1 -6.1
Public debt (% GDP) 47.8 44.1 42.2 39.2

(e): Estimate (f): Forecast *Including grants **Including international cooperation

STRENGTHS

  • Agricultural (cotton, coffee), forestry and mining (diamond, gold, uranium) potential
  • Substantial international financial support
  • Member of the Central Africa Economic and Monetary Community (CEMAC)

WEAKNESSES

  • Extreme and widespread poverty
  • Fragile and unstable security and political conditions leading to significant population movements both within and out of the country
  • Low economic diversification
  • High dependence on commodity exports
  • Illegal gold and diamond exports undermine government revenues

RISK ASSESSMENT

Growth threatened by insecurity

Although the Central African Republic (CAR) was only slightly affected health-wise by the COVID-19 pandemic, the economic consequences, coupled with major post-electoral conflicts, have affected growth prospects for 2022. The outlook is upbeat but remains hostage to the fragile security situation, which notably prompted Cameroon to close the corridor between Douala (the region's main port) and Bangui for three months in 2021, blocking a large share of Central African trade.

 

The CAR economy is dependent on exports (15% of GDP), which should be lifted by the post-COVID-19 recovery and firm prices. Wood, gold, diamonds, cocoa, coffee and cotton account for 90% of export earnings. Diamond exports (8% of the total) have resumed after stopping almost entirely at the height of the pandemic. On the agricultural side (35.5% of GDP and 77.1% of employment in 2020), cotton production and exports are also expected to increase, following the government’s continued efforts to clear its arrears with producers. Wood-related activities (2/3 of CAR exports) and forestry are in line to increase in 2022 with the global recovery of the construction sector, which has caused wood prices to explode (377% year-on-year increase in May 2021). Surging prices and increased demand for wood, particularly from key customers such as China, should boost Central African exports and enable a shrinking of the current account deficit. Imports are also set to increase owing to higher oil prices (1/3 of imports).

 

Private consumption, which contracted in 2020 and 2021 because of impoverishment of the population, is expected to pick up and should support growth in 2022. Private investment will be supported by the adoption of business-friendly reforms, including measures to protect minority investors. The introduction and effectiveness of these measures are threatened by the risk of renewed violence and insecurity, which could delay the implementation of economic reforms, but also by the future path of the COVID-19 pandemic. In September 2021, only 0.2% of the Central African population was vaccinated against the disease.

 

Increasing dependence on external aid

Management of post-election conflicts and the closure of the Bangui-Douala corridor caused the budgetary situation to deteriorate and the deficit to swell. That said, the public debt burden decreased slightly due to IMF relief. It should continue on its downward trend in the long-term, with more than half of public spending covered by external multi- or bilateral financing, much of it in the form of grants. In 2020, international donor grants represented 12.6% of GDP, or more than 60% of total government revenue. For instance, in the context of the health crisis, the French Development Agency, the African Development Bank, the World Bank and the EU provided budget support of more than USD 400 million (18% of GDP). The IMF also granted two concessional loans under its Extended Credit Facility approved in December 2019. Finally, at the end of 2021, the Central African States Development Bank granted a loan of CFAF 15 billion (USD 27 million) to the Central African Republic, notably to help the country fight COVID-19 and strengthen the health system.

 

Security is the main political challenge

CAR has been in a highly precarious political and security situation since 2013. Although a peace agreement signed in February 2019 between the government and rebel groups helped to reduce the violence, the security situation is still extremely poor. This was the backdrop for the presidential election held at the end of 2020, which saw outgoing President Faustin-Archange Touadéra re-elected. The election focused on security issues, which are key to economic recovery. However, since the election, there have been frequent clashes between supporters of the president and the Coalition of Patriots for Change (CPC), an armed movement made up of six rebel groups. These confrontations prevented the organisation of legislative elections, which were finally held between May and August 2021 and gave the ruling presidential party a relative majority. The first challenges of Faustin-Archange Touadéra's new mandate are to restore security and the country’s territorial integrity and to fight the impunity that fuels the cycle of violence.

 

The new peace agreement provides for the integration of rebel representatives into the government and is designed to enable the national army to regain control of the territory (70% to 80% is in rebel hands), with units composed of soldiers from both the regular army and rebel groups. However, it is uncertain whether the agreement will be implemented.

 

CAR also has cross-border problems, often linked to population movements. Incidents occurred in 2021 with Chad, whose army sustained losses after CAR armed forces pursued Central African rebels fleeing over the border separating the two countries.

 

Last updated: February 2022

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