World oil prices will continue to influence Angola’s economy

28 February 2018

The development of oil and gas sector will continue to influence the behaviour of the Angolan economy, given the country’s limited efforts in diversifying the country’s economy, the Economist Intelligence Unit (EIU) said in its latest report on the African country.

As a result, the report said, the Angolan economic growth rate is expected to average 2.4% in the 2018-2022 period, compared with a rate of 4.7% in 2011-2015.

The EIU predicts that the growth rate of the Angolan economy will contract this year to 1.6%, compared to an estimated 2.7% for 2017, rising in 2019 to 2.3%, and in the years following growing by an annual average of 0.2 percentage points to reach 3.0% in 2022.

The EIU analysts also noted that pressures on public expenditure remain high and therefore they expect an average budget deficit of 7.0% in the period under consideration, although it should be reduced in the final part due to an expected increase in oil prices on international markets.

The EIU predicts that the price per barrel of oil will rise slightly to US$60.4, about 11% more than in 2017, but still not enough for Angola to achieve a balanced state budget, without a deficit.

The deficit will be covered by issuing internal and external debt and the report noted that a presidential order from August 2017 authorised the Minister of Finance to issue eurobonds in the amount of US$2 billion, the schedule for which has yet to be announced.

The document said that the devaluation of the kwanza by more than 25% against the dollar in the auctions held in January will keep the inflation rate high during the first half of the period under analysis (2018/2022), with the average rate remaining at double digits until at least 2021.

The Angolan currency will continue to depreciate, bearing in mind that the difference between the official and black market exchange rates remains high, although there has been a recent, though limited, convergence, of the two rates.

The report stresses that the Angolan government will continue to seek loans from Chinese banks, notably to finance the construction of infrastructure, but points out that Chinese financial institutions are increasingly reluctant to provide financing for projects whose repayment will be complicated. (macauhub)