Country Economic Forecasts > Angola

With crude oil prices bouncing around US$30pb, Angola's external account will deteriorate further this year. The sharp fall in exports means the AOA will come under more severe pressure, and forex liquidity conditions will remain extremely tight despite further expected adjustments in the exchange rate. Tight foreign exchange liquidity will again act as a drag on economic growth, as firms struggle to acquire hard currency to pay for imported materials. And as well a weaker AOA and higher administered prices, product shortages will also contribute to a sharp rise in inflation, to an average of over 16% in 2016, probably prompting further monetary policy tightening. Despite the fact that a pro-active response to falling crude oil prices should prevent substantial fiscal imbalances from arising, Angola still looks set to record a fairly wide fiscal deficit this year. But the lack of a developed domestic debt market will help to keep spending in check. And other factors related to revenue-side reforms, in addition to the positive impact of a weaker AOA exchange rate, should help the fiscal accounts to weather the oil price storm, but this will come at the cost of slower GDP growth. We have lowered our growth forecast for 2016 to 3.4% in 2016, before a modest pick-up to 3.9% in 2017.