Deutsche Bank says Angola is vulnerable to economic change in China

20 January 2015

Angola is better prepared to respond to the oil shock than it was in 2008, according to analysts at Deutsche Bank, who also warned of vulnerability resulting from a slowdown in China’s economy.

“When prices fell more than a third in 2008-2009, from US$92 to US$61 per barrel, Angola’s GDP growth collapsed from 23 percent in 2007 to 2.4 percent in 2009, the budget surplus fell from 4.7 percent to -7.4 percent (despite a significant cut in public spending) and the current account balance changed from 17 percent to 10 percent, along with an 18 percent devaluation of the currency in 2009,” according to the German bank’s analysts, adding “in the current context, several factors can offset the risk of a serious economic destabilisation.”

Among the factors that can help Angola overcome the oil crisis affecting state oil revenues, which account for about three quarters of total revenue, are “solid GDP growth and a moderate level of public debt, substantial financial reserves, a sovereign fund capitalised with US$5 billion and a more diversified economy than in 2008, with the non-oil sector accounting for 60 percent of GDP in 2013, compared to just 40 percent in 2008. ”

Analysts at Deutsche Bank in research note dated December but only now published, said, “Angola was not significantly affected by the production of shale oil and consequent loss of market share in the United States, as Nigeria was,” but warned that “the country is vulnerable to a downturn in demand from China,” since almost half of its oil exports have gone to China, since 2012.

China, moreover, has been one of the main sources of funding of Angola’s development, not only by granting commercial loans or very low interest rates, but also through an “oil-for-money” scheme, through which China lends money which is paid back in oil. (macauhub/AO/CN)

MACAUHUB FRENCH