Angola’s economy expected to continue contracting in 2019/2020, EIU says

27 March 2019

Angola’s economy is expected to continue contracting this year and in 2020, with negative rates of 1.9%, before returning to positive values in the period from 2021 to 2023, according to the latest projections from the Economist Intelligence Unit (EIU).

This year and next low oil prices will continue to have a negative influence on the country’s economy, but between 2021 and 2013, with rising prices and increased production, there will be a reversal of negative to positive rates.

Accordingly, EIU analysts expect that the Angolan economy will grow at an annual average of 6.3%, with a maximum rate of 7.0% in 2021 and a minimum of 5.9% in 2023.

The weak domestic economy, combined with the appreciation of the US dollar and weak investor appreciation of emerging markets, will continue to weigh on the kwanza in 2019, which is expected to depreciate.

The EIU added in its report that, despite efforts to diversify the economy, activity will continue to be dependent on developments in the oil sector, with no major changes to be expected in the short to medium term.

Inflation is expected to remain high over the period under review in this document, 2019/2023, ranging from a high of 24.3% this year to a low of 11.4% in 2023, due to the continued weakness of the currency and the fact that most consumer goods are imported and paid for in foreign currency.

The report noted that the government is trying to increase tax revenue and reduce public spending by introducing new taxes such as VAT and eliminating a set of subsidies programmes as a result of the reforms implemented by President João Lourenço and the restrictions imposed by the International Monetary Fund.

The EIU analysts predict that the General State Budget will continue to present deficits until 2020, with -2.9% of Gross Domestic Product, before returning to positive balances from 2021 (2.3%) to 2023 (4.7%), although the external balance will only be positive in 2022, with a rate of 2.6% of GDP. (Macauhub)