Joe Brock
ANGOLA’S oil-dependent economy is set to slow this year, key infrastructure projects will be shelved and swathes of social spending are facing the chop as a global crude price slump takes its toll on Africa’s second-biggest producer.
Angola’s cabinet last week sent a revised 2015 budget to parliament, cutting the assumed oil price to $40 (R462) a barrel, from $81 previously projected, and slashing $14 billion off planned spending, the finance ministry said.
The government’s failure to shield sub-Saharan Africa’s third-largest economy from tumbling oil prices is likely to intensify public anger towards President José Eduardo dos Santos, who has been accused of enriching a political elite and leaving the poor behind during his 35 years in power.
Dos Santos told Angolans last month that 2015 would be “difficult economically” and some public spending would have to be cut, including on fuel subsidies and infrastructure.
Austerity drive
The austerity drive is a result of a halving of global oil prices in the last six months. Oil accounts for around half of Angola’s gross domestic product (GDP), 80 percent of tax revenues and 90 percent of export earnings.
“The impact of low oil revenues will be reflected in growth,” said Samantha Singh at Standard Bank, which expects Angola’s GDP to grow around 3.1 percent this year, down from 4 percent last year and a peak of 12 percent in 2012.
Angola’s finance ministry had predicted growth of around 9 percent this year but that was before the budget cuts.
Singh said she expected Angola to post a budget deficit of around 8.1 percent of GDP, while the kwanza was likely to weaken to new record lows against the US dollar and there was further upside to inflation, currently at 7.5 percent.
It is also likely Angola’s current account balance could slip into deficit this year, for the first time since 2009, if oil prices remain depressed, economists say.
Much-needed efforts to diversify Angola’s economy are also set to be undermined as public spending is cut. – Reuters