CENTRAL Key conditions and Recent developments challenges AFRICAN REP. CAR’s economic growth stagnated in 2021 due to renewed insecurity, coupled with Repeated instability and violence have the protracted effects of COVID-19 on the exacerbated CAR’s socioeconomic indica- global economy. Economic activity suf- Table 1 2021 tors and kept the country at the bottom fered particularly in 2021Q1 as renewed Population, million 4.9 of most development rankings. While en- insecurity amid election disputes disrupt- GDP, current US$ billion 2.4 dowed with ample natural resources, the ed production and trade. Boosted by the GDP per capita, current US$ 484.6 a country’s economy is poorly diversified, resumption of commerce along the Gini index 56.2 b with agriculture and forestry constituting Douala-Bangui corridor and security School enrollment, primary (% gross) 102.0 b 53.3 the backbone of economic activities. The gains, economic activity picked up in the Life expectancy at birth, years Total GHG Emissions (mtCO2e) 88.9 agriculture sector accounts for more than second half of the year. Mining and agri- 75 percent of total employment, and tim- cultural production accelerated, owing to Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2008), 2011 PPPs. ber, cotton, coffee, diamond, and gold improved security around production sites b/ WDI for School enrollment (2016); Life expectancy represented more than 85 percent of total and favorable rainfall. Public investment (2019). exports in 2019. Poverty is high, with declined from 11.4 percent of GDP in 2020 more than 7 in 10 Central Africans living to 7.5 percent of GDP in 2021 as the gov- below the international poverty line ernment unwound its COVID-19 fiscal Renewed insecurity prevented the Central (measured using US$1.90 per day, 2011 stimulus package. Economic growth is African Republic’s (CAR) economy from PPP). Inadequate social protection sys- projected to increase by 3.2 percent in 2022, rebounding in 2021. The outlook is sub- tems and limited access to education and supported by the prospect of improved se- healthcare facilities are major bottlenecks curity and the ceasefire agreed in the Lu- ject to downside risks arising from a re- for human capital accumulation. The for- anda roadmap (i.e., the regional initiative versal in security gains and the impact of mal private sector is small and con- to restore peace). Conflict and COVID-19 the Ukraine-Russia war on commodity strained by several structural challenges, have hampered progress in reducing ex- and food prices, which could adversely af- including limited access to finance, a treme poverty, with 71.4 percent of the weak regulatory framework, poor infra- population living in extreme poverty in fect public finances and growth and result structure (e.g., energy and transporta- 2021, up slightly from 71.0 percent in 2020. in significant social hardship and human- tion), lack of skilled labor, and a fragile Renewed conflict in late 2020/early 2021 itarian costs. The ability of traditional security and political environment. The contributed to significant inflationary partners to provide support in a geopoliti- humanitarian situation remains precari- pressures in the first half of 2021, which cally more complex environment weighs ous, with 43 percent of the population decelerated markedly as traffic along the facing acute food insecurity. As of Janu- country’s lifeline resumed. As a result, heavily on the outlook, which is vulnera- ary 2022, there were 734,000 refugees out- inflation reached an average of 3.8 per- ble to headwinds. side the country—the highest level since cent in 2021—above the 3 percent re- December 2013—and 652,000 internally gional ceiling. High inflation is projected displaced persons. to linger in 2022 on the back of rising FIGURE 1 Central African Republic / Real GDP growth FIGURE 2 Central African Republic / Actual and projected and contributions to real GDP growth poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 8 78 250000 76 6 74 200000 4 72 70 2 150000 68 0 66 100000 64 -2 62 -4 60 50000 58 -6 2016 2017 2018 2019 2020 2021 2022 2023 2024 56 0 Exports Gross Fixed Investment 2008 2010 2012 2014 2016 2018 2020 2022 2024 Government Consumption Private Consumption International poverty rate Real GDP pc Real GDP growth Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 1 Apr 22 commodity prices and persistent disrup- 10.8 percent of GDP in 2021, owing mainly Inflation is expected to remain below the tions in food supply chains. The Bank of to delays in the disbursement of official regional convergence criteria in the medi- Central African States tightened its mon- transfers. The SDR allocation (equivalent um term, contingent on stable and im- etary policy in late 2021 over concerns to 5.8 percent of GDP) did, however, pro- proved security on the Douala-Bangui about the evolution of foreign exchange vide additional liquidity to meet some of corridor and a slowdown in inflationary reserves, which, despite higher oil prices the country’s financing needs. The trade pressures at the global level. The fiscal and the International Monetary Fund balance improved as the rebound in ex- balance is projected to remain in deficit 2021 Special Drawing Rights (SDR) allo- ports during the second half of 2021 ex- in the medium term, as donor financing cation, represented just above 3 months’ ceeded the uptick in imports. Persistent gradually declines without being offset worth of regional imports of goods and global uncertainty related to COVID-19 by domestic revenues. Public debt is pro- services by end-December 2021—roughly and renewed conflicts translated to a low- jected to remain sustainable. The current the same as at end-December 2020. er-than-expected recovery of foreign direct account balance is expected to improve in The overall fiscal deficit widened from 3.3 investment. The current account balance is the medium term, reflecting an improve- percent of GDP in 2020 to 6.1 percent of projected to improve in 2022 as exports re- ment in the trade balance, but it should GDP in 2021, reflecting a decline in do- cover and official transfers resume. remain structurally in deficit. mestic revenue and the cancelation and Risks to the outlook remain high and tilted postponement of budget support from to the downside. The absence of donor donors due to geopolitical tensions and budget support could lead to the accumu- the lack of transparency of the country's Outlook lation of external arrears and possible non- security expenditures. Pressures on public payment of public wages, resulting in sig- finances were high throughout 2021 de- Provided that security gains are not re- nificant socioeconomic hardship. A rever- spite cuts in public spending, forcing the versed, and the impact of the Ukraine- sal in security gains could undermine eco- government to rely on bridge financing Russia war on the global economic re- nomic activity and traffic on the main trade on the domestic market. Cashflow pres- covery is contained, economic growth is corridor. The possible lingering effect of sures are expected to remain high in 2022, expected to average 3.5 percent in the the pandemic, coupled with the impact of with a risk of a potential liquidity short- medium term, supported by solid agri- the Ukraine-Russia war at the global level, age if budget support from donors does cultural and industrial output on the could lead to persistent disruptions in not materialize. The government has al- supply side and high private consump- global supply chains and higher commodi- ready revised downward its public ex- tion on the demand side. Under these as- ty prices, resulting in higher fuel and grain penditure plan and is considering new sumptions, per capita income is expect- prices, with adverse effects on public fi- borrowing on the domestic market to pre- ed to return to its pre-COVID-19 level by nances and private consumption, as well vent any liquidity shortages. 2023. Extreme poverty is projected to re- as on poverty due to the effects of higher The current account deficit widened from main high, with a slow decline between food prices. 8.8 percent of GDP in 2020 to an estimated 2022 and 2024. TABLE 2 Central African Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 3.1 0.9 0.9 3.2 3.4 4.0 Private Consumption 5.7 -4.2 0.5 4.7 5.3 2.3 Government Consumption 7.7 21.5 -4.9 -10.3 2.9 1.0 Gross Fixed Capital Investment -9.6 28.3 -9.6 6.7 -1.4 12.3 Exports, Goods and Services 1.9 -2.8 -5.5 6.3 8.2 9.3 Imports, Goods and Services 4.9 1.0 -10.3 7.1 8.4 4.9 Real GDP growth, at constant factor prices 2.6 0.9 1.2 3.1 3.4 3.9 Agriculture 3.1 4.5 3.2 3.8 4.2 4.0 Industry 2.1 0.0 -0.2 0.6 1.0 1.3 Services 2.3 -1.2 0.4 3.5 3.6 4.6 Inflation (Consumer Price Index) 2.8 2.3 3.8 3.6 2.7 2.5 Current Account Balance (% of GDP) -4.8 -8.8 -10.8 -6.8 -7.9 -6.6 Fiscal Balance (% of GDP) 1.7 -3.3 -6.1 -2.3 -2.0 -1.8 Debt (% of GDP) 47.9 44.0 48.4 44.9 43.4 41.9 Primary Balance (% of GDP) 2.0 -3.0 -5.8 -1.8 -1.4 -1.3 a,b International poverty rate ($1.9 in 2011 PPP) 70.8 71.0 71.4 70.9 70.6 70.3 GHG emissions growth (mtCO2e) 0.9 0.6 0.6 1.9 2.2 2.4 Energy related GHG emissions (% of total) 39.8 39.8 39.7 40.3 40.8 41.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2008-ECASEB. Actual data: 2008. Nowcast: 2009-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2008) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 2 Apr 22