Angola Business Forecast Report Q1 2013


January 3, 2013
41 Pages - SKU: BMI4938390
License type:
Table of Contents Related Reports
Countries covered: Angola

Core Views

We are forecasting robust real GDP growth of 8.7% in 2013 as majornew oil fields come online, while investment and private consumptionwill continue to expand their share of GDP. Nevertheless, theeconomy's heavy reliance on oil will continue leave Angola's headlinegrowth beholden to production delays and disruptions.

The ruling Popular Movement for the Liberation of Angola (MPLA)'slandslide victory in the August 31 general election is unlikely to havea discernible impact on policy direction or political stability over theshort term and we expect continuity to be the order of the day in2013.

Going into 2013 we expect to see a broad continuation of the stableinflationary conditions that saw headline inflation reached historiclows in H2 2012. That said we expect the twin pressures of aneconomy gathering steam and chronic structural bottlenecks to limitthe potential for a sustained drop in price growth.

Major Forecast Changes

We have revised down our 2012 growth estimate for the Angolaneconomy to 8.4% from 9.9% and bumped up our 2013 projectionto 8.7% from 8.1%, as the rebound in oil exports in 2012 has beenless front-loaded than anticipated. We now believe the introductionof new capacity will be more evenly distributed across 2012 and2013.

Key Risks To Outlook

The core risk to Angola's economy is a dramatic change in oil pricesor a disruption of production. However, with soaring exports andproduction surging, oil prices would need to fall dramatically to exacta significant toll on the economy. Risks are further mitigated by thegovernment's conservative US$77/bbl budget assumption for theprice of oil.

Given that our forecasts only include planned oil projects, the upsidepotential posed by the country's vast and unexploited sub-salt reservespresent a major upside risk to our forecasts over the medium-to-longterm.

The main political risks will likely come from within the ruling partyitself, with the issue of presidential succession having the potentialto divide the party and slow policymaking.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Continuity The Theme In 2013, But Major Challenges Ahead
Following a comfortable election victory in August there has been – in line with our predictions – little evidence of a discernible shift in
policy direction by President dos Santos and his ruling MPLA party and we expect political stability and continuity to remain the order of
the day in 2013. Additionally, eyes will increasingly be on vice-president and heir apparent Manuel Vicente as he seeks to establish his
leadership credentials, while further outbreaks of the public demonstrations witnessed in 2012 remain a real possibility.
TABLE: ANGOLA POLITICAL OVERVIEW
Long-Term Political Outlook
An Uncertain Path To Maturity
Although Angola has become one of the largest and fastest-growing economies in Sub-Saharan Africa, its transition over the past
decade has not been complemented by a move towards a more open political system. The growing centralisation of power, both political
and economic, presents the key risk to stability over the coming decade.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth Forecast Bumped Up In 2013
We have revised down our 2012 growth estimate for the Angolan economy to 8.4% from 9.9% and bumped up our 2013 projection to
8.7% from 8.1%, as the rebound in oil exports – following the production issues in 2011 – has been less front-loaded than anticipated.
While we expect both investment and private consumption to steadily expand as a share of GDP over the coming years, the reliance on
oil will continue to leave Angola's headline growth beholden to production delays and disruptions.
TABLE: PIPELINE OF OIL PROJECTS
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
C/A Surplus To Narrow, But Risks To The Upside
Angola's current account surplus will decline steadily over the next few years as oil production levels-off and import demand remains
robust, driven by investment associated with new deepwater projects and ambitious government infrastructure plans. We nevertheless
maintain a broadly positive stance on Angola's balance of payments position which – following the build-up of significant reserve cover
and prudent economic policies – is now better placed to withstand external shocks. Moreover, given that our oil production forecasts
only include planned projects, we note significant upside risks to these projections over the medium-to-long term.
TABLE: CURRENT ACCOUNT
Monetary Policy
Inflation Stable In 2013
Our outlook for inflation in Angola in 2013 is for a broad continuation of the stable price conditions witnessed in 2012 underpinned by
an increasingly stable exchange rate. That said we expect the twin pressures of an economy gathering steam and chronic structural
bottlenecks to limit the potential for a sustained easing in price growth. With these factors in mind we are forecasting inflation to remain
relatively steady over the course of 2013, finishing the year at 9.2% year-on-year.
TABLE: MONETARY POLICY
Exchange Rate Policy
Still Positive On The Kwanza
While the kwanza has been on a slight depreciatory path since the start of 2012, the outlook for the currency is firmly positive. Rapidly
growing foreign reserves have bolstered support for the currency in recent quarters and we expect conditions to remain supportive over
the medium term. Moreover we expect growing confidence in the tightly managed unit to see the authorities allow a greater degree of
price flexibility, as has been in evidence over the last 10 months.
Chapter 3: 10-Year Forecast
The Angolan Economy To 2021
Economic Diversification Vital For Long-Term Growth
Real GDP growth in Angola is set to decline in tandem with a contraction in oil production growth. We expect annual economic
expansion to average 7.4% over 2013-2016, followed by a more moderate 6.2% over 2017-2021. Economic diversification will be vital
for the maintenance of a healthy economic trajectory.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
TABLE: LABOUR FORCE QUALITY
Infrastructure
TABLE: AFRICA – ANNUAL FDI INFLOWS, 2008-2010
TABLE: TRADE AND INVESTMENT RATINGS
Market Orientation
TABLE: TOP EXPORT DESTINATIONS, 2002-2009 (US$MN)
Operational Risk
Chapter 5: Key Sectors
Oil & Gas
TABLE: ANGOLA OIL & GAS – HISTORICAL DATA AND FORECASTS, 2009-2016
Other Key Sectors
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: FOOD & DRINK SECTOR KEY INDICATORS
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
TABLE: PHARMA SECTOR KEY INDICATORS
TABLE: TELECOMS SECTOR KEY INDICATORS
Chapter 6: BMI Global Assumptions
Global Outlook
Downward Revisions, But Core Views Remain Unchanged
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST

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