Angola: Economy to overcome predicted 4% recession in 2020, grow 1.7% in 2021 – Fitch Solutions

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Angola: Economy to overcome predicted 4% recession in 2020, grow 1.7% in 2021 – Fitch Solutions

1:26 CAT | 05 Nov 2020

Luanda. [File photo: Lusa]

Consultant Fitch Solutions estimates that Angola’s economy will overcome the 4% recession forecast for this year and then grow 1.7% next year, accelerating to 2.5% the following year.

“A slight rise in oil production and exports will push the economy out of recession in 2021,” an analysis by Fitch Solutions of the Angolan economy states, in which it writes that “GDP will return to positive ground in 2021, with 1.7 percent and 2.5 percent in 2022.

These figures are below the IMF’s estimate, which foresees an average of 3.1% over the next two years, Fitch Solutions noted, after five years of negative GDP growth.

In the note sent to customers, Fitch Solutions’ analysts wrote that although the production cuts imposed by the Organisation of Petroleum Exporting Countries had been extended until April 2022, the compulsory reductions for Angola would fall from 277,000 barrels per day in the second half to 209,000 barrels by the end of the period.

Thus, they added, production is expected to increase over the next two years, with average growth of 4.7 percent, adding 0.4 percentage points to economic growth over the next two years.

Domestic demand is also expected to increase slightly over this period, as a result of the normalisation of economic conditions and the assumption that the government will not impose further containment measures, analysts say, anticipating 18% inflation in 2021 and 14.2% in 2022.

The improvement in economic conditions and the slowdown in the spread of the pandemic should translate into a priority for public spending, says Fitch Solutions.

“The government will probably focus on public spending when the worst of Covid-19 passes, resuming fiscal consolidation in line with the IMF aid programme,” so “expenditure cuts are likely, especially in 2021, which will cause public spending to fall by 1.2 percent next year,” conclude the analysts.

Source: Lusa