Luanda facing 'unprecedented negative consequences'

Uma caixa de tomate de 20 quilos passou de 13 mil kwanzas para 31 mil

Uma caixa de tomate de 20 quilos passou de 13 mil kwanzas para 31 mil

  |  Natacha Roberto

The research department of the South African bank Standard Bank on Wednesday said that Angola's economy is to face unprecedented negative consequences if oil remains at current prices and the country stays in recession this year.

"Oil is trading at around $30 a barrel at the time we wrote, and if prices stay at these historic levels for some time, it will have unprecedented negative consequences for Angola's economy," according to analysts from the economic research department of African bank Standard Bank.

In this month's report on African economies, sent to clients and accessed by Lusa, economists pointed out that oil is trading at almost half the amount budgeted for Angola ($55 per barrel) for this year and anticipate a rise in inflation and a fall in the value of the kwanza against the dollar.

"The exchange rate between the dollar and the kwanza has remained relatively stable, around 500 kwanzas per dollar, but there is a strong probability that the rate will rise again due to liquidity pressures caused by the Covid-19 pandemic and the oil price war between Saudi Arabia and Russia," the analysts said, anticipating a devaluation of the Angolan national currency.

"We have increased our exchange rate forecast for the end of this year to 719.6 kwanzas per dollar when it was previously at 629.8, which represents an annual increase of 49.2% compared to the 30.6% initially forecast," they said.

At the macro level, the economic studies department predicts that Angola will continue to register negative growth, as has been the case since 2016: "The probability of Angola coming out of the four-year recession has materially decreased, GDP is expected to contract again when the initial forecast was for growth of 1.4%," they said.

The government will be forced to review the state budget to reduce the risk of a large budget deficit when it previously forecast a surplus of 1.2% of GDP, analysts pointed out, concluding that being under financial assistance and having completed the stages of the International Monetary Fund's programme is an advantage for the country.

"The positive track record in the current programme is an advantage for the country, and we do not rule out the possibility of a review of some of the programme's metrics due to the current challenges, as financing needs, both internal and external, will inevitably increase."

Premium