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Angola Country Risk Report Q2 2016

  • March 2016
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views Angola will face another challenging year in 2016 as low oil prices, a weak investment climate, and rising inflation all contribute to low real GDP growth. The outlook improves slightly for 2017 as accelerating oil production supports exports, but the structural weaknesses in the economy will remain largely unaddressed. A depreciating currency, the removal of subsidies, and an increasing money supply will see inflation continue to rise through H116 in Angola, prompting the monetary policy committee of the Banco Nacional de Angola to make furthers hikes in the policy rate. Angola’s budget will record another heavy deficit in 2016 as even lower oil prices offset the impact on government revenues of several devaluations made to the local currency. Furthermore, the government’s clear intention to increase expenditures over the course of the year will present another headwind to balancing the books.

The continued decline in oil prices will push Angola’s current account deficit further into the red, despite falling imports. The deficit will be largely financed through the selling of central bank reserves and the increase in external debt issued by the government. Price stability and increasing production in the oil sector will offer some brief respite in 2017. In the eventuality that Angolan president, José Eduardo Dos Santos, sticks to his word and steps down from office in 2017, any political succession will continue the struggle between elites within the current status-quo and their increasingly vocal grassroots critics. Any attempt to keep the presidency in the hands of the Dos Santos family will be particularly damaging, incurring a backlash both from snubbed elites and the wider population. Major Forecast Change Revisions to our oil production forecast have had a significant bearing on our projections for all macroeconomic indicators, as the economy is highly dependent on the oil sector. GDP growth, the current account, and the fiscal deficit are all in a less robust position as a result.

Table Of Contents

Angola Country Risk Report Q2 2016
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Oil Weakness Keeps Growth Outlook Low8
Angola will face another challenging year in 2016 as low oil prices, a weak investment climate, and rising inflation all contribute to low
real GDP growth The outlook improves slightly for 2017 as accelerating oil production supports exports, but the structural weaknesses
in the economy will remain largely unaddressed
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS9
TABLE: PRIVATE CONSUMPTION FORECASTS10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal Policy And Public Debt Outlook 11
Deficit Will See Little Improvement As Revenues Stagnate11
Angola's budget will record another heavy deficit in 2016 as even lower oil prices offset the impact on government revenues of several
devaluations made to the local currency Furthermore, the government's clear intention to increase expenditures over the course of the
year will present another headwind to balancing the books
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES12
External Trade And Investment Outlook 13
Current Account Deficit Will Peak On Further Oil Weakness13
The continued decline in oil prices will push Angola's current account deficit further into the red, despite falling imports The deficit will be
largely financed through the selling of central bank reserves and the increase in external debt issued by the government Price stability
and increasing production in the oil sector will offer some brief respite in 2017
Outlook On External Position 14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE14
TABLE: TOP 5 GOODS IMPORTS IN 201415
Monetary Policy 16
Further Rate Hikes Inevitable On Climbing Inflation 16
A depreciating currency, the removal of subsidies, and an increasing money supply will see inflation continue to rise through H116
inAngola, prompting the monetary policy committee of the Banco Nacional de Angola to make furthers hikes in the policy rate
TABLE: TOP 5 GOODS EXPORTS IN 201416
Monetary Policy Framework 17
Chapter 2: 10-Year Forecast 19
The Angolan Economy To 2025 19
Opportunities After Years Of Pain19
Slow economic growth will become the new normal in Angola over the next three to five years, as oil prices experience only a gradual
recovery and the economy is punished for decades of commodity dependence This will force structural changes onto the economy that
will yield a mild uptick in GDP growth beyond 2020
TABLE: LONG-TERM MACROECONOMIC FORECASTS19
Chapter 3: Political Outlook 23
SWOT Analysis 23
BMI Political Risk Index 23
Domestic Politics 24
Mounting Risks From Likelihood Of Managed Succession24
In the eventuality that Angolan president, Jose Eduardo Dos Santos, sticks to his word and steps down from office in 2017, any political
succession will continue the struggle between elites within the current status-quo and their increasingly vocal grassroots critics Any
attempt to keep the presidency in the hands of the Dos Santos family will be particularly damaging, incurring a backlash both from
snubbed elites and the wider population
TABLE: POLITICAL OVERVIEW24
Long-Term Political Outlook 25
Path To Political Inclusion Uncertain And Slow25
Although Angola has become one of the largest and fastest-growing economies in Sub-Saharan Africa, its transition over the past
decade has not been complemented by a move towards a more open political system The concentration of power, both political and
economic, presents the key challenge to economic development and risk to political stability over the coming decade
Chapter 4: Operational Risk 29
SWOT Analysis 29
Operational Risk Index 29
Operational Risk 30
TABLE: OPERATIONAL RISK30
Trade Procedures And Governance 31
TABLE: SUB-SAHARAN AFRICA - TRADE PROCEDURES AND GOVERNANCE RISK 32
Vulnerability To Crime 33
Chapter 5: BMI Global Macro Outlook 37
Global Macro Outlook 37
Tail Risks Mounting Amid Sub-Par Growth37
TABLE: GLOBAL ASSUMPTIONS 37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %38
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%) 38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %39
TABLE: MACROECONOMIC DATA and FORECASTS41

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