Angola: Economic growth to fall, though “comfortably”

9 March 2009

Lisbon, Portugal, 9 March – The expansion of the Angolan economy will be curbed in 2009 according to economists from Portuguese bank, BPI, who predict a “comfortable” landing during which authorities will do everything to maintain the level of investment.

“Surplus income obtained over the last few years means that authorities can still go ahead with their main investment programs, which could mean that a high pace of growth in the non-oil sector is maintained,” said BPI’s economic studies division in a report published last week. BPI controls the main private Angolan bank (Fomento).

However, they stress that “the authorities recognize [that] any projects not yet allocated will have to be rescheduled.”

BPI is predicting a slowdown in the economy this year in the region of 3 percent – a more pessimistic forecast than those of the Economist Intelligence Unit (less than 2.3 percent) and the International Monetary Fund (4 percent growth, soon to be revised).

The Portuguese economists say that Angola has some “comfort factors” at its disposal, such as the buoyancy of the non-oil sectors which should “maintain the dynamism,” namely the transforming industry, agriculture, electrical energy production, commercial services and construction.

Agriculture in particular, would benefit from the public credit lines, the cane sugar production project (Odebrecht and Sonangol) and the development of 25,000 hectares in Uíge, Zaire and Bengo provinces.

In the industrial sector the construction of the Unicer factory and the start of operations at the mineral water bottling factory are highlighted, while Public Works have the Water Treatment Master Plan in Luanda, various networks and parking in the capital, as well as the renovation of airports at Catumbela and Lubango.

In the commercial sector projects for refrigerated warehouses in 12 of Angola’s 17 provinces and the continuation of the Programme to Restructure the System of Logistics and Distribution of Products Essential to the Population (Presild) are highlighted, while port traffic shows “very significant movement,” even with “obvious signs of congestion” at the capital’s port.

According to BPI, Angolan exports could fall in a “very significant” way, although “the slowdown of economic activity should also dictate the decline of imports and of services associated with oil exploration.”

As regards investment, Angola “continues to be an interesting destination, overcoming a less favourable situation elsewhere, and a significant part of the State’s financial needs for 2009 are being met by credit lines and bilateral loans.

“The main impact” of the current circumstances, say the BPI economists, is a result of the “fall in oil prices, which, by reducing the income of the State should lead to less growth in public spending on which the progress of the non-oil economy depends so heavily,” said the report.

The government should now revise its figures based on an oil price per barrel of US$35, “in a global economic context” which is “quite different” from the one on which the original version of the State Budget was based.

The foreseeable “maintenance of the oil price per barrel at reduced levels for a prolonged period of time,” will “oblige authorities to significantly readjust the level of public spending.” (macauhub)