Angolan economy to continue to contract in 2019 and 2020

25 October 2019

Angola will only see economic growth again in 2021, when its Gross Domestic Product is expected to rise by 2.4%, according to forecasts from the Economist Intelligence Unit (EIU), in its latest country report.

EIU forecasts for the coming year point to a 3.6% contraction, which will slow to 1.9% in 2020, before returning to positive rates the following year and reaching 2024, the last year of the review period, with growth of 6.2%.

All of these variations are centred on both the evolution of oil prices and oil production, which from July to September 2019 fell by 26,000 barrels per day compared with the three-month period ending in June, according to secondary sources, to 1.394 million barrels per day.

In the part of the report on economic growth, the EIU analysts said the outlook for Angola is not good, with a forecast of four consecutive years of economic contraction due to the drop in oil production resulting from the depletion of some oil fields and the absence of investment in the exploration of others or in the exploration of fields that are considered marginal.

Recalling that Angola is not even producing as much oil as the quota set by the Organization of Petroleum Exporting Countries (OPEC), the report said that the return to growth will come from agriculture, mining, construction, manufacturing and services as soon as credit conditions improve and the Government decides to support the non-oil economy in a decisive manner.

Following the launch of an international public tender for the concession of 10 oil blocks in the Namibe and Benguela basins, with a combined area of over 55,000 square kilometres, exploration activities in deep and ultra-deep waters are expected to begin soon, although the results should only be visible in 2024.

The inflation rate is expected to stand at 16.9% in 2020, a decrease of less than one percentage point from the 17.8% estimate for 2019, which will be due to the continued depreciation of the national currency, the kwanza, from low oil prices and the lower quantity exported, which results in a lower amount of foreign exchange, and the introduction on 1 October of Value Added Tax (VAT).

The slowing trend in the rate of the kwanza’s depreciation, which is expected to take place from 2021 onwards, will cause a lower rise in prices and the inflation rate should drop to 10.4% by 2024, according to forecasts by the Economist Intelligence Unit. (Macauhub)