Oil prices, public expenditure and elections are Angola’s greatest economic risks

10 May 2007

Lisbon, Portugal, 10 May – A fall in oil prices, high levels of public expenditure and the election scenario are the main risks facing the Angolan economy, according to Espiríto Santo Research (ESR).

The current favorable external situation ensures, “the stabilization of the main macro-economic variables,” with high levels of growth thanks to exports of oil and diamonds and investments in infrastructures, but there are risks related to this “benign scenario,” ESR said.

The figures from the Espírito Santo group company, were part of a recent presentation to Spanish businesspeople at the end of April, at this year’s edition of the Madrid Export Salon (IMEX).

Amongst the main risks facing the market, are possible oscillations in the oil market, as well as a potential slowdown of the global economy.

“The strategy for stabilization of prices through foreign exchange market interventions (followed by Angola) is not sustainable in the long term and affects the competitiveness of the non-oil sectors, accentuating the economy’s dependence on oil,” said ESR.

Another current risk is the high level of public spending, “essentially sustained by oil revenues, including obtaining loans supported by future sector revenues.”

ESR also noted “the first legislative and presidential elections in the post-war period,” possibly in 2008.

“Although no significant changes are expected in the political arena, the elections are an element that could change confidence levels of foreign investors,” said ESR’s analyst.

The “lack of infrastructures, high population levels and low levels of qualified workforce,” are other question marks placed on the Angolan economy. (macauhub)