Macroeconomic performance
Real GDP growth of about 3.5 percent in 2018 is lower than in 2017 (5.8 percent) due to weaker-than-expected iron ore extractions, lower prices since 2014, and the closure of the main mining company, Shandong Iron and Steel Company, in 2017.

The fiscal deficit widened to –7.7% of GDP in 2018 from –6.8% in 2017, mainly due to a lack of revenue mobilization and budget overruns related to elections. Public debt has risen significantly, from 55.9% of GDP in 2016 to 60.8% in 2017. To remedy this situation, new measures have been taken: the adoption of a single treasury account and the reduction of customs duty waivers and exemptions.

The Central Bank has proactively implemented a tight monetary policy and limited its support for public financing. However, weaknesses in internal control continue to threaten the accumulation of foreign exchange reserves and macroeconomic stability. Since 2016, the exchange rate has depreciated by more than 30% and in 2018, inflation remains high, at around 13.9%.

In 2018, the current account deficit widened to –16.9% from –13% in 2017, due to higher imports of consumer goods and weak export performance. Exports are mainly made up of unprocessed products: gold, diamonds, iron ore, and cashew nuts, while imports mainly include rice, oil, and machinery. Real GDP growth is expected to reach 5.6% in 2019 and 5.8% in 2020, driven by higher private agricultural and mining investment, in a context of business climate reforms.

Outlook: positive and negative factors
The growth outlook is accompanied by macroeconomic imbalances. The fiscal deficit, financed in part by the accumulation of payment arrears, is expected to persist and poses a significant risk to economic growth, due to liquidity compression and the rising cost of investment projects. The government is considering more prudent fiscal and monetary policies and is demonstrating strong political will to improve.
The deficit is partly due to increased public investment in infrastructure, such as roads and energy, which in the medium to long term is expected to boost economic activity.

However, persistent macroeconomic imbalances could threaten economic growth, including the fiscal deficit and the increase in the current account deficit to –18.4 percent in 2019 and –20.8 percent in 2020, caused by weak growth in agricultural and mining exports. Other risk factors include public debt, which is still on the rise, and commodity price shocks. In general, the country is extremely vulnerable to external shocks due to its dependence on commodity exports.

The government has undertaken several reforms. The Mining Law should improve the tax regime for mining companies, allow for better supervision and increase revenues. Two policies, launched in 2018, aim to ensure financial sustainability in the energy sector, particularly in the implementation of the following objectives: universal access to electricity and increasing the energy mix.

Finally, the country's Roadmap for National Agricultural Transformation (2018) aims to increase the country's rice self-sufficiency, livestock development and crop diversification, and to do so has identified four strategic axes: improving the policy environment, promoting women and youth in agriculture, implementing private sector-led mechanization, and sustainable management of biodiversity.

Source: African Economic Outlook (AEO) 2019