Angola will face another challenging year in ---- as low oil prices, a weak investment climate, and rising inflation all contribute to low real GDP growth. The outlook improves slightly for ---- as accelerating oil production supports exports, but the structural weaknesses in the economy will remain largely unaddressed. ...Oil has traditionally accounted for as much as -- of the country s total export revenues and over -- of government income, so the collapse in the price of Brent crude from an average of USD--.- per barrel (/bbl) in ---- to a projected average of USD--/bbl in ---- will understandably have a negative impact on the wider economy. Although a slight boost in oil production in ---- will be positive for real GDP � our Oil & Gas team expects a -.- production increase � the sector will continue to act as a net drag on growth through two main channels: � The currency: the prominence of oil exports in Angola s wider balance of payments has meant the kwanza has come under considerable pressure as inflows of foreign capital and currency have fallen. The kwanza has depreciated against the dollar by around --.- since the beginning of ----, after the central bank made a series of devaluations. ...Although the government has made some cuts to expenditure in USD terms, it has still resorted to increasing the external debt burden in order to finance spending. We expect public sector external debt to peak at --.- of GDP in ----.
...Government Consumption: Government consumption will grow at an average real rate of -.- each year between ---- and ----, resulting in a gradually larger contribution to real GDP. This growth comes as government revenues increase on the back of improving economic conditions and increasing production in the oil sector, with a greater amount of expenditure dedicated to much needed infrastructure projects as a result. However, with oil accounting for up to -- of total public revenues, shocks in the oil price will leave public finances exposed to volatility. ...This contribution will average -.- percentage points (pps) each year until ----, with real growth in GFCF averaging -.- . While our forecasts for a slow recovery in the oil price will weigh on private sector investment into Angola s untapped oil reserves, a packed infrastructure pipeline will en- -- Business Monitor International Ltd www.bmiresearch.com
...Given that the government is making insufficient progress in diversifying its sources of revenue, and the value of oil exports is expected to remain well below ---- levels for the foreseeable future, we believe the increasing cost of servicing the govern- ment s external debt will begin to weigh heavily on investor sentiment. We forecast that the government will be forced to levy more foreign currency earnings from the private sector through increasing taxation or imposing export tariffs in order to meet its obligations. ...
