Inflation target for 2015 in Angola compromised due to crisis

16 July 2015

The Angola government’s inflation target for 2015, of less than 9 percent, is hampered by the crisis affecting the country, according to an economic report on the second quarter by Banco Angolano de Investimestimento (BAI) Europe.

The situation is the result of the international oil price crisis, which has halved Angolan tax revenues and foreign exchange inflows to the country, increasing the cost of imports and of access to products, including food.

“It is now expected, following the largest foreign exchange slip, there will be an acceleration in prices and it appears reasonable to assume, as of now, an inability to meet the annual inflation target which, according to the Revised State Budget should not have exceeded an annual average of 9 percent,” the BAI Europe analysts said.

The report from BAI Europe recalls that the Consumer Price Index (CPI) rose only 1.2 percent in May, thus presenting the “highest monthly rate since December 2011,” and in the first five months of the year inflation in Angola was already 4.24 percent, compared to a target set by the government of between 7 and 9 percent.

BAI Europe analysts also addressed the various measures decided by the government and the National Bank of Angola to “make the macroeconomic adjustment process more effective,” which extends spending restraint (cutting one third of all public expenditure in the revised State Budget), particularly in terms of reserve requirements and the continuous devaluation, since June, of the Angolan kwanza.

This set of measures as part of the “the exchange rate and monetary policy” is “clearly aimed at moderating domestic demand, thus strengthening the fiscal component,” the document said, cited by Portuguese news agency Lusa. (macauhub/AO)