Perspectives for the Angolan economy in 2019

The Angolan economy appears to have remained stuck in recession in the final quarter of 2018, following a disappointing third-quarter outturn which had marked the fourth consecutive quarter of contraction. The country’s all-important oil sector continued to disappoint in Q4: Falling global oil prices wiped off any gains stemming from marginally higher oil production compared to the previous quarter. On top of that, the index of economic activity continued to deteriorate in Q4, pointing to the second largest contraction in nearly three years in November, mainly due to the poor performance of the oil industry. In a similar fashion, external sector metrics appeared no more upbeat, with exports contracting in November on the back of lower energy shipments. Meanwhile, after securing a deal with the IMF in December, Angola is poised to re-enter international bond markets in the coming months, with a 10-year bond reportedly in the works. This could prove challenging, as S&P Global Ratings revised Angola’s outlook from stable to negative on 8 February.

Analysts see growth recovering this year, following last year’s estimated 2.4% contraction. Moderating inflation, a more accommodative monetary policy environment and a more stable kwanza should support private consumption, while ongoing economic reforms, reinforced by support from the IMF, are expected to prop up investment activity growth in 2019. Angola’s chronic dependence on its oil sector remains the key downside risk to the outlook, however. Analysts project GDP to expand 1.2% in 2019, down 0.1 percentage points from last month’s forecast, and 2.3% in 2020.