LUANDA, December 2, 2008 -- In an effort to contribute to donor coordination and harmonization in Angola, the World Bank in November organized its Fifth Economic Forum.
Economic attaches from western and African countries, as well as representatives from China, gathered at the World Bank office in Luanda to share information on the country’s current state of affairs and on the global financial crisis and its possible impacts on Angola’s economy.
Other issues discussed included growth prospects for 2008-2010, the Angolan government’s development plan for the period 2009-2013, and the 2009 proposed State budget.
The event was chaired by World Bank Country Manager for Angola Alberto Chueca and by the Bank’s Senior Country Economist Ricardo Gazel.
In his presentation, Gazel praised the Angolan government’s fiscal and monetary policies in recent years, which, he said, helped remarkably to reduce the inflation rate. Gazel’s presentation on the country’s economic performance and the world’s economic crisis provided the basis for a lively discussion among the participants.
According to Gazel, Angola’s economic performance continues to be strong, with both the oil and non-oil sectors performing well, with average real GDP growth around 14 percent in the last six years and close to 18.5 percent in the last four years. Measured in billions of current dollars, GDP has doubled every third year, from 19.8 in 2004 to 60.4 in 2007. The GDP real growth rate of 22.3 percent in 2007 reflected the real growth of 20.4 percent in the oil sector and 25.7 percent in the nonoil sectors, including growth of 37 percent in construction, 32.6 percent in manufacturing and 27.4 percent in agriculture.
For 2008, GDP growth rate should be around 15 percent and about 10 percent in 2009 (government forecasts 11.8 percent) as oil production hits or even exceeds its OPEC reference-quota by the end of 2008. However, given the decline in oil prices, nominal GDP is likely to decrease in 2009 resulting in lower national income, lower government revenues and consequently lower rates of growth of public expenditures and investment, which have significant negative impact on the demand for the non-oil sectors.
GDP Real Growth rates
Â
2007
2008
2009
2010
IMF
21.1
16.0
13.3
11.7
Government
23.3*
15.0**
11.8***
NA
Senior Economist
Â
15.0
10.0
8.0
Sources: * Report “Executed Budget for 2007” ** Statement by Deputy Governor of Central Bank *** Budget Proposal for 2009
As oil production stabilizes around two million barrels per day, GDP real growth rate will depend basically on the non-oil sector, whose performance is highly correlated to oil prices. Oil tax revenues remain a major engine of growth through government expenditures, especially investment.
According to Gazel, the impact of the financial crisis in Angola is likely small due to the following:
No stock market
No strong connection of the domestic bank system with international financial markets (except via Portuguese banks, where performance should be closely monitored)
A small inter-banking credit market
Low loans to deposit ratios
Solid macroeconomic indicators in the last year: budget surplus, high international reserves, low external debt.
However, Angola is not isolated from the world economy and so potential impacts include:
Real Economy: the lower price of oil means lower government revenues and lower national income. Nominal GDP will decline, current account surplus will decline substantially, recent fiscal surpluses are likely to become a deficit in 2009, and, given the prominent role played by the public sector, lower growth of public current and capital expenditures will impact the non-oil sector negatively.
Exchange Rate: a stronger dollar can have an impact on inflation as import prices from European goods would be lower in Kwanzas (local currency).
Investment and Capital Flows: less liquidity in international credit markets can reduce private investment flows as the price of capital increases and commercial banks’ credit lines can be reduced. Although existing bilateral credit lines are likely to remain in place to finance Angola’s imports from countries issuing them, further deterioration of economic and financial conditions in those countries could result in lower levels of new bilateral financing.
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