Democratic Republic of the Congo B3 rating balances economic fragility with healthy growth prospects

The Democratic Republic of the Congo’s (DRC) B3 rating primarily reflects the country’s fragile economy and very low per capita income relative to its peers, Moody’s Investors Service says in its latest Credit Analysis for the country published this week. However, the country’s robust growth prospects mitigates some of these constraints.

The annual report is available through the links at the end of this press release. The research is an update to the markets and does not constitute a rating action.

“We expect growth to flourish on the back of significant foreign investment in the mining sector and for consumption to follow suit as the economy recovers from more than two decades of civil war,” says Aurelien Mali, Moody’s Senior Analytical Advisor — Africa and co-author of the report.

Moody’s expects economic growth to average 10.2% over the next two years, which is 3.4% above the average rate over the past 10 years.

Moody’s report says that while the rating also reflects the country’s very weak institutional strength, these indicators have gradually improved over the past 10 years and authorities have embarked on a series of further reforms to enhance transparency and improve the business climate.

Positive pressure on DRC’s rating could stem from continued foreign investment, an increase in foreign-exchange reserves and fiscal buffers, continued strengthening of the country’s institutions and the acceleration of fiscal reforms.

Conversely, downward pressure could come from commodity price declines, the rapid deprecation of the Congolese franc, a large deterioration of the government’s fiscal balance sheet and increasing instability in the east of the country.

The Credit Analysis assesses DRC’s credit profile in terms of Economic Strength, Institutional Strength, Fiscal Strength and Susceptibility to Event Risk, which are the four main analytic factors in Moody’s Sovereign Bond Rating Methodology.

For more information, Moody’s research subscribers can access these reports at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_180937