Angola’s budget deficit will remain high and should reach 5.9% of GDP in 2017

11 April 2017

Angola’s budget deficit will remain high, although it is expected to decline from 5.9% of gross domestic product (GDP) this year to 4.4% in 2021, as spending pressures reduce following the 2017 general election, according to the Economist Intelligence Unit (EIU).


The EIU’s latest report on Angola noted that in addition to social and public works spending aimed at rebuilding the infrastructure destroyed during the civil war that are included in the State Budget for 2017, there are costs related to holding the general election.


The Government’s projection of a 5.9% deficit is based on a price of US$46 per barrel of oil, lower than the estimate of US$56 per barrel for this year, but technical problems, a drop in production decided by OPEC as well as the repayment of several loans, led to the EIU calculating the same value for the deficit.


The EIU also noted that the deficit could be higher than expected if state oil company Sonangol does not contribute to the state coffers, as was the case in 2016.


Considering the weak results obtained so far in the process of economic diversification, GDP growth will remain dependent on the oil sector, with the EIU report predicting that it will average 2.8% in 2017/2021, a rate that compares with an average of 4.1% in the 2012-2016 period.


Output growth will range from a minimum rate of 2.4% this year to a maximum of 3.5% in 2018, standing at between 2.5% and 2.8% between 2019 and 2021, the period analysed in the EIU report.


Growing more than the government forecast of 2.1% this year, mainly due to the price of oil on which the State Budget is based, growth of the Angolan economy will tend to remain low due to moderate oil production and cooling of the Chinese economy, which could eventually lead to a further drop in oil prices.


Inflation control, the main task of the National Bank of Angola, is expected to be moderate, according to the EIU, which estimates that it should reach 23.4% this year and decrease gradually to 7.7% by 2021. (macauhub)