Angola’s oil production is expected to continue to decline in 2019/2020, remaining well below the quota agreed with the Organization of Petroleum Exporting Countries (OPEC) of 1.481 million barrels per day, predicted the Economist Intelligence Unit (EIU).
As a result, driven by the depletion of some wells and the lack of investment in new ones, Angola’s Gross Domestic Product (GDP) is expected to contract by 2.6% this year and 3.6% in 2020 and return to growth at a rate of 4.2% per year in the period from 2021 to 2023.
This drop-in production in Angola in those two years is due to the government being limited in spending, as its main source of income, taxes on oil production and subsequent export, are also falling.
The EIU analysts said that the return to economic growth from 2021 will be due to the agricultural, mining, construction, industrial and services sectors, which will benefit from better credit given a lower inflation scenario.
The recently released document added that during this period oil production will continue to fall due to the depletion of some wells and the fact that the investment needed to explore new deep and ultra-deep wells has not emerged due to the weak business environment in the country, prohibitive exploration costs and the increased cost of producing each barrel of oil.
The EIU noted that recent measures to attract investment and reduce nepotism are encouraging but there is a need to combat corruption, the weak legal framework and the public sector competing with the private sector.
“A key barrier to the introduction of structural reforms has been the control exercised by the political elite over the economy, which has prevented more transparency,” the document said, adding that the decline in the oil sector would force private sector development.
Angola’s National Statistics Institute (INE) announced this week that the country’s Gross Domestic Product contracted 0.4% in the first quarter of 2019 compared to the same period of 2018.
The INE statement said that the downturn in Gross Domestic Product (GDP) growth is mainly due to Trade (-3.2%), Financial (-4.8%), Manufacturing (-6, 5%), Telecommunications (-6.8%) and Oil (-6.9%) activities. (Macauhub)