Gaborone - The Angolan economy will register a real GDP growth of 2.7 percent throughout 2016, up from the 2.2 percent attained in 2015 as low oil prices, negative investor sentiment and rising inflation keep growth levels subdued, a Britain-based economic think-tank has said.
In a new report analysing the country’s prospects for economic growth in the second half of 2016, Business Monitor International (BMI) said the Angolan economy would only register sluggish improvements in 2017 as accelerating oil production supports exports although structural economic weaknesses would likely persist.
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“Angola’s economy will continue to struggle against sluggish real GDP growth in 2016 as low oil prices, weak investor sentiment, and rising inflation all present headwinds to the economy. We expect real GDP growth to equal just 2.7 percent in 2016, a mild improvement from the 2.2 percent we estimate was recorded in 2015, but still well below the 2005-2014 average of 7.6 percent.
“The outlook is slightly more positive in 2017, when we forecast that a 6.8 percent increase in production in the oil sector will contribute to a higher rate of real GDP growth of 4.4 percent. However, this uptick will be short-lived as the structural weaknesses in the economy persist. These include dependence on crude oil exports and continued downside pressure on the local currency. Given Angola’s dependence on the oil sector, it is not surprising that the current climate will contribute as much to the economy’s expected weakness as it did to the economy’s strength over the past 15 years,” BMI said.
The think-tank said the Angolan economy would struggle against the global collapse of the price of Brent crude oil, which contributes 95 percent of the country’s total annual export revenues and over 70 percent of government income. Crude oil prices have plummeted from an average of $99.50 per barrel in 2014 and are projected to end 2016 at a below average cost of $40 per barrel.
Further, the oil sector would continue to subdue the country’s growth prospects by keeping the heavily depreciated local currency – the Kwanza – under inflationary pressures as inflows of foreign capital and currency dwindle. BMI said Angola would ultimately pay the price for over-depending on oil exports as the mainstay of the economy.
“Given the underdeveloped nature of Angola’s manufacturing and agricultural sectors, it is not surprising that higher import costs caused inflation to climb to 17.3 percent year-on-year by January 2016 – up from 14.3 percent the previous month. With further devaluations expected, we believe inflation will remain high, averaging 15.8 percent over 2016.
“In addition to the threat of growing inflation, the Kwanza’s weakness has added significant costs to the country’s external debt burden. Since the collapse in oil prices, the government has been forced to borrow heavily from abroad in order to maintain expenditure and restore some semblance of financial liquidity in the economy,” BMI concluded.
ANA