The outlook for economic growth in Angola remains bleak, and projections point to 2020 being the fourth consecutive year of recession, as a consequence of developments in the oil sector, according to analysts from the Economist Intelligence Unit (EIU) in its latest report on the country.
The EIU’s Gross Domestic Product (GDP) forecast for this year is a contraction of 1.3%, two percentage points lower than the estimate of 3.3% for 2019, and the Angolan economy is only expected to return to growth in 2021, when it is projected to post a growth rate of 2.3%.
The years following the period analysed in this report – 2019 to 2024 – are expected to see more sustained growth, with growth of 3.2% in 2022, 3.5% in 2023 and 5.9% in 2024.
The forecast for this year is based on the continued decline in oil production, estimated by the government at 1.389 million barrels per day in 2019, which is lower than even the maximum limit of 1.481 million barrels per day set by the members of the Organization of Petroleum Exporting Countries (OPEC), due to the exhaustion of some wells and the lack of investment in prospecting in more recent years.
The drop in oil production and, consequently, in exports will drive tax revenues further downwards, reducing the government’s capacity to carry out expenditure, along with more stringent conditions on granting credit to the economy, thus hindering consumption and investment.
According to the EIU, a return to positive growth rates should occur on the back of a likely increase in production of non-oil sectors of the economy, such as agriculture, mining, construction, manufacturing and services, as monetary policy loosens some of its current rigidity and the government continues to support these sectors as a way to accelerate economic diversification.
The most significant growth of GDP for 2024 is the result of an expected increase in oil production due to the launch in October 2019 of the first auction of oil concessions since 2011, in deep and ultra-deep waters.
The EIU report noted as positives the current drive to attract more foreign investment but restated that the control that politicians have over the economy, with resistance to change in terms of increasing transparency, will remain as an obstacle to the introduction of structural reforms. (macauhub)