Global crisis boosts importance of Angola’s relations with China and Brazil

17 October 2011

Lisbon, Portugal, 17 Oct – The global economic crisis is boosting the importance for Angola’s growth of closer ties with China and Brazil, as they have more dynamic economies that the United States or Europe, said Portuguese bank BPI.

The BRIC (Brazil, Russia, India and China) countries, with which Angola does around one third of its total trade, and particularly China and Brazil, “although not immune from the world downturn, offer comparatively more favourable growth prospects,” said BPI in its latest report on the Angolan economy.

For 2011, it said, Angola’s growth prospects remained “strong.”

But the turbulence of the international markets and the signs of cooling of the economies of the United States, Europe and Japan could lead to a drop in world demand for raw materials, particularly oil, “the main contagion channel for the Angolan economy,” it noted.

The outlook also threatens the availability of foreign investment, but “these effects could be attenuated by the close relationship that Angola has built up with other emerging markets with strong growth,” such as China, Brazil and others.

According to official Chinese figures published in Macau, in the first eight months of the year, two-way trade between Angola and China totalled US$17.857 billion.

Angola exported goods to China worth US$16.168 billion and imported goods worth US$1.688 billion.

The latest projections from the International Monetary fund (IMF) pointed to growth of 3.7 percent in 2011 and 10.8 percent in 2012, bolstered by the non-oil sector.

Due to the reduced “public drive as a catalyst for consumption and private investment,” reflected in current public expenditure and investment, BPI has lowered its growth projections for the Angolan economy, from 6.3 percent (in May) to 2.5 percent.

“For 2012, prospects for oil production are more encouraging, as new oil wells go online,” said the economists from the Portuguese bank, which controls Angola’s Fomento bank.

The price of oil has fallen over the last few months, although the trend is now of greater stability.

Oil production in Angola has been below expectations this year, but “the situation will tend to change in the final quarter, with the start of operation of the new units,” noted BPI.

“Even so, the performance of oil exports has been positive and allowed for accumulation of foreign reserves at a higher monthly rate than was expected,” which is currently over US$22 billion, the report noted.

BPI also noted the efforts underway to diversify the Angolan economy, which include the start of operations to extract liquid gas, which is due to start showing results in 2012.

Angola has enough proven reserves of natural gas to supply around 5.2 million tons per year, but this figure could be even higher as, “most of the deep water and ultra deep water have this potential and prospecting of this has yet to be carried out.” (macauhub)