EIU’s projections for Angolan economic growth are lower than those from the IMF

19 April 2018

Forecasts for Angola’s economic growth by the Economist Intelligence Unit (EIU) are less generous than those of the International Monetary Fund (IMF), which were announced on Tuesday, with rates of 1.7% this year against the forecast of 2.2% by the IMF in its Spring World Economic Outlook report.

By 2019 while the IMF expects growth of 2.4%, the Economist Intelligence Unit (EIU) predicts 2.3%. The biggest difference in the forecasts is for 2017, with the IMF suggesting an economic growth rate of 0.7% and the EIU forecasting 2.7%.

The IMF also announced its forecast for 2023, with real growth of 4.0%, but the EIU report only covers the period from 2018 to 2022, a year in which the Angolan economy is expected to grow by 3.0%.

The latest EIU report on Angola once again states that economic development will continue to be largely driven by the oil sector, given limited efforts in the process of economic diversification.

The report also said that the devaluation of the kwanza since the beginning of the year, when exchange rate changes started to be set by the market, as well as the introduction of Value Added Tax (VAT) from 2019 will keep the inflation rate at high levels “and is expected to remain in double digits in the period under review.”

The EIU also anticipates that the Angolan currency, which has already lost a quarter of its value against the euro and the dollar since January, should continue to depreciate given the exchange rate difference between the official exchange rate and the black market rate.

The report said that inflationary pressures will continue to have a negative impact on private consumption throughout 2018, leading to an economic growth of 1.7%, which will be aggravated with the introduction of the VAT, as companies will pass the costs of the new tax onto consumers.

The economy will tend to grow more as the country adjusts to lower oil prices, and some oil wells, such as Kaombo, start producing. This will allow for an increase in public and private spending and the economy will grow to higher rates, from 2.4% in the 2019/2020 period.

Although in the next two years there is a trend towards faster growth of the economy, with an average rate of 2.8%, the EIU said investment outside the oil sector will continue to face a difficult environment.

The report recalled that the average growth of 2.4% forecast for 2018 to 2022 is less than a quarter of the figure for the decade ending in 2014 and projects that average per capita income will continue to lose value at an annual average of 0.8%. (macauhub)