Africa Oil & Gas: Low oil prices keeps driving Angola budget deficits

Low oil prices on international markets will lead Angola’s state budget to continue to show significant deficits between 2017 and 2021, although 5.7% of GDP projected for this year is expected to fall to 4.3% in 2021, according to the Economist Intelligence Unit (EIU).

The EIU said in its the latest report on Angola that, given the low diversification of the economy, the growth of gross domestic product (GDP) will continue to be driven by the oil sector and record an average rate of 2.8% in the 2017-2021 period, compared with 4.1% recorded in the 2012-2016 period.

The inflation rate will remain will high, despite the reduction in public fuel subsidies and continued devaluation of the national currency and, after standing at 22% this year, will slow to a single figure in 2021 with 7.7%.

The devaluation of the national currency, the kwanza, will tend to slow down compared to the values achieved in 2015/2016 but the lack of dollars on the official market will make the gap in relation to prices on the black market remain relatively high.

The EIU said in the report that controlling inflation will continue to be a major objective of the National Bank of Angola. Between January 2015 and June 2016 the BNA increased the benchmark interest rate by 700 basis points to 16%.

“Further increases in the benchmark interest rate should occur in the first half of the 2017/2021 period, taking into account the effects on inflation of a weak currency, although it will be moderated by government pressure to adopt a less restrictive monetary policy,” said the report, to which Macauhub had access.

GDP growth is expected to reach the highest point of this period in 2018, with a rate of 3.5%, after which it should range between 2.8% in 2018 and 2021 and 2.5% in 2020, according to the EIU forecasts. (source: macauhub)