Angola’s economy expected to return to growth in 2021, after two years of contraction

24 May 2019

The Angolan economy will only grow again in 2021, according to forecasts by the Economist Intelligence Unit (EIU), which forecasts a positive rate of 4.2% for that year and falling again in the next two years, at an average of 3.45%.

After an economic contraction estimated at 0.9% in 2018, the EIU expects a contraction of 4.5% this year, which will increase by 30 basis points to minus 4.8% in 2020.

The summary with forecasts for Angola from 2019 to 2023 shows that oil production will tend to decline as the years go by, from 1.4 million barrels per day in 2019 to 1.3 million in 2020, 1.2 million in 2021 and 1.1 million in the last two years of the period considered.

The Angolan minister of Mineral Resources and Oil has recently called on oil companies operating in the country to cooperate in reversing the current drop in production.

Diamantino Azevedo asked those present at the meeting to ensure production remained at 1.49 million barrels per day, a target that is registered as the average production in the 2018-2022 National Development Plan and is also included in the proposal to review the General State Budget for 2019 as crucial for the formation of tax revenues.

In its latest report on Angola, the EIU notes that the decline in oil production will lead to a 12.6% drop in the country’s exports in 2019, which will be further aggravated in 2020 as prices per barrel of oil are expected to remain low.

“Exports are expected to rebound in 2021 due to higher prices per barrel but the expected drop in production will cause revenues to stagnate by 2023,” the report said.

The document also outlines that imports will tend to decline in 2019, due to a fall in domestic demand and continued depreciation of the kwanza against the euro and the dollar, which will lead to a deterioration in the prices of imported products.

The current account surplus is expected to decline from an estimated 7.6% of gross domestic product (GDP) in 2018 to 2.7% in 2019, owing to falling oil prices, which will worsen to a deficit of 1.7% of GDP in 2020, as exports decline.

That balance should return to surpluses only in 2021, with a rate of 0.5% of GDP, as a result of the recovery of prices per barrel, but the drop in oil production is expected to drive a return to deficits, of -1.0% of GDP in 2022 and -1.5% in 2023. (Macauhub)