Angola’s State Budget for 2018 is too optimistic, BPI bank says

29 January 2018

The macroeconomic scenario on which the Angolan State Budget for 2018 is based is “too optimistic,” considering the challenges that the Angolan economy will still have to face this year, according to the Economic and Financial Studies Unit of Portuguese bank BPI.

The report said that the announced exchange rate adjustment, which has already begun, would restrict economic activity in the country leading to a rise in inflation and a higher cost of living. The government has also committed, according to the 2018 State Budget, to fiscal consolidation, in order to put the public debt ratio on a downward path and at a sustainable level (below 60% of GDP).

Despite the recent recovery of oil prices to more comfortable levels for Angola (close to US$70 per barrel), there are still strong constraints on the design of economic policies, which are expected to remain restrictive content in order to counter the imbalances generated.

“In the current context, there is a clear need to introduce measures to diversify the country’s economy, widening the tax base and reducing its vulnerability to the outside world,” the document said.

The government led by President João Lourenço expects economic activity to grow by 4.9% this year, after growth of 1.1% last year, which assumes “a significant recovery of the oil sector, which between 2016 and 2017 should have contracted, on average, by 1.4%, and is projected to grow by 3.1% in 2018.”

The increase in oil production, BPI says, “seems optimistic, considering the restrictions identified by the government in the Macroeconomic Stabilisation Programme for 2017-2018 (PEM), namely the issues of maturation of oil fields and weak investment in research and development by the main players in the oil sector in Angola.” (macauhub)