Economic activity during 2008 will increase in all Lusophone states, especially Angola

31 December 2007

Macau, China, 31 Dec – The economies in all Portuguese-speaking countries are set to expand in 2008 but it is the African members of the bloc, particularly Angola, which have the most favorable forecasts.

The most recent report from the London-based Economist Intelligence Unit (EIU) says Angola’s GDP growth of 21.4 percent is the world’s biggest, despite a slight slowing down in relation to expectations for 2007 of 23 percent.

Besides growth in its oil and diamond sectors, Angola is benefiting from exponential increase in investment, particular state spending backed by foreign credit. China’s state Eximbank has granted loads totaling US$ 7 billion and private banks have recently provided credits.

In the biggest operation to date by private Angolan banks, a banking consortium has opened a line of credit worth US$ 3.5 billion to the Luanda government to fund reconstruction projects.

Figures from Angola’s central bank show that due to economic recovery available credit grew by 80 percent in mid-2007 compared to the same period in 2006.

“There is a climate of optimism in relation to the Angolan economy with some positive surprise over the authorities’ ability to rehabilitate infrastructures and improve conditions of the people,” Portugal’s BPI bank said in a recent report on the Angolan economy.

The other side of Angola’s economic growth is inflation, which has fallen slower than the authorities would have liked and which is also contributing to bottlenecks in the supply of goods and services.

The Angolan Finance Ministry predicts that inflation will stick at around 10 percent in 2008, a slight fall from the 12 percent estimated for 2007.

The Angolan economy is set to expand by 16.2 percent in 2008, less than the 19.8 percent estimated for this year that began with a prediction of economic growth of 31.2 percent.

Angola’s oil sector, which accounts for the biggest slice of the country’s GDP, will grow by 13.3 percent in the coming year, while the non-oil sector is forecast to expand by around 19.5 percent.

The World Bank’s Angola representative, Alberto Chueca, said recently that Angola’s GDP could climb from the current US$ 60 billion to US$ 100 billion within three years.

While Angola’s economic growth is showing signs of slowing down, Cape Verde’s economy is accelerating, a trend in the Lusophone that only has parallels in Portugal, according to available forecasts.

In its latest report, Cape Verde’s central bank forecasts GDP growth of between 6.5 and 7.5 percent in 2008, more than the 6.4 percent expected for 2007, and a continuing consolidation of the archipelago’s financial situation.

The International Monetary Fund forecasts Cape Verde’s GDP growth will be 6.9 percent in 2007, rising to 7.5 percent in 2008 and 7.8 percent in 2009.

Cape Verde’s growth prospects “reflect significant increases in investment flows of foreign direct investment. Medium-term growth will be above 7 percent, on average, driven mainly by the expansion of the tourism industry through investment,” the IMF said.

The economies of Mozambique and Sao Tome and Principe are also displaying stability in the rhythm of economic growth.

In a recent interview with Reuters, Mozambican President Armando Guebuza predicted that his country’s economy would expand by 7 percent in 2008, with inflation reined in at 6 percent.

Mozambique’s economic success has been supported by major foreign investment projects and helped by the recent pardoning of a large chunk of the country’s overseas debt and boosted agricultural production. Maputo hopes to give an important impetus to country’s energy sector in the coming years and this will be facilitated with the transfer in ownership of the Cahora Bassa hydroelectric (HCB) dam from Portugal to Mozambique.

Transfer of HCB, Guebuza told Reuters, “will encourage more investment in the area of energy which is vital for industrialization and also for exports to countries in the region (southern Africa), which have an energy deficit.”

A recent World Bank report said Mozambique was the African state with the most diversified and sustainable growth in the decade before 2005, followed by Sao Tome and Cape Verde.

With average growth of 8.3 percent between 1996 and 2005, Mozambique was ahead of Rwanda (7.6 percent), Sao Tome (7.1 percent) and also Botswana and Uganda in the ranking of diversified economies, according to the Indicators of African Development report for 2007.

For Sao Tome, the IMF predicts growth of 6 percent in the coming year, roughly the same as the world financial body forecasts for 2007 and 2009.

“The economy became reanimated in 2006, supported by an increase in capital flows which stimulated private investment and also through state spending. GDP growth is led by the sectors of construction, services and commerce,” said the IMF report on Sao Tome, which will receive important news in 2008 about oil reserves in its territorial waters.

For Guinea-Bissau, the IMF forecasts an economic slow down from 3.7 percent to 3.1 percent in 2008, a trend that will only be reversed in 2009.

From 2009 and the four years following, Guinea’s GDP will grow to a maximum of 4 percent in 2012, said the IMF. But this scenario remains “uncertain” due to Guinea’s dependence on foreign aid and serious constrictions to the national economy, particularly at the level of infrastructures and functioning of the state sector.

Across the Atlantic, Brazil’s economy is set to expand by 4.5 percent in 2008, compared to the 5.2 percent forecast for 2007, according to the country’s central bank. This Growth is being fuelled by national demand and investment, the bank added.

“The regularity in the process of economic growth is reinforced by the trajectory of investment, both in terms of recent results and in relation to the intentions expressed by business research of expectations. Evolution of family consumption continues, favored by better credit conditions, and by real growth in wages and positive indicators of confidence,” Brazil’s central bank said last week.

Meanwhile, the Portuguese government predicts GDP growth of 2.2 percent in 2008 and 2.8 percent in 2009 to complete four years of continuous acceleration.

East Timor, after record GDP growth of 27.4 percent in 2007, will see its economy expand by 3.8 percent in the coming year, according to IMF forecasts. (macauhub)