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AMR: Angola

AMR: Angola

We expect GDP growth of -1.0% and 1.4% in 2019 and 2020 respectively. C/A balances of -0.6% of GDP and 2.4% of GDP are forecast for 2019 and 2020. By year end, the USD/AOA is likely to trade closer to 405.3. 

Nominal GDP
Real GDP growth

GDP growth – exiting recession as oil stabilizes

We still maintain that the Angolan economy should exit its four-year recession in 2020, should renewed investments in the oil sector help stabilize oil output at 1.4m bpd, even if temporarily, as a result of the improved regulatory environment and ongoing structural reforms. We see Angola committed to the IMF program, which goes a long way in supporting the structural reforms the country needs to undergo for a sustained return to macroeconomic stability. Most likely, the privatization program will also contribute to the much-needed increase in foreign direct investment (FDI).

Balance of payments - improvement suspended

We see the C/A swinging into a deficit this year of 0.6% of GDP, from a surplus of 7.2% of GDP last year. Oil exports, representing over 96% of total export revenues, will possibly decline to USD28.8bn this year from USD30.4bn last year as a result a combination of a decline in both volume and prices. It is unlikely that Angola will return to the market for a Eurobond issue this year. As a result, given the fall in oil exports, we are likely to see the pressure on FX reserves continue. We expect gross FX reserves to close the year at USD14.1bn, which represents 7.1-m of import cover, improving to USD15.3bn next year, or 7.8-m of import cover, as exports’ performance improves, and Angola issues another Eurobond. 

Monetary policy- rates to fall slowly

Given the slow decline in inflation, we may now see the BNA cut policy rates more prudently. We expect only a 100 bps cut in the BNA rate to 14.5% next year as inflation eases.  We see inflation closing this year at 15.6% y/y in Luanda, with the annual average at 17.0% y/y. The national headline inflation rate will likely be at 15.5% y/y in Dec 19, with an annual average at 16.8% y/y. Both are likely converging to an annual average of 15% y/y next year. 

FX outlook – still a depreciating bias 

The kwanza is likely to maintain a depreciating bias to reflect FX liquidity pressures and help protect FX reserves.


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