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Angola Country Risk Report Q1 2019

Angola Country Risk Report Q1 2019

Rising oil prices will provide tailwinds to various sectors of the economy in 2018 and 2019, leading Angola to emerge from a prolonged recession While falling oil production will likely keep growth below historic levels, the risks are skewed to the upside given prospects for business-friendly reform and greater external financing to drive investment inflows

President João Lourenço's recent ministerial reshuffles and promised economic policy shifts signal an increased commitment by the new administration to reforming Angola's business environment and promoting diversification beyond the oil sector While this suggests potential for much stronger long-term economic growth, oil will remain the dominant sector over the next decade, leaving Angola heavily exposed to external shocks that could weigh on growth prospects

Angolan policymakers are likely to maintain a steady pace of depreciation over the coming quarters as the central bank looks to restore liquidity in foreign exchange markets Although the kwanza's official exchange rate remains stronger than the commonly used parallel rate, the gap has shrunk significantly as the official rate weakens and the parallel rate appreciates and we expect it will continue to narrow moderately through end 2019 This will make Angola gradually more internationally competitive while improving private sector access to foreign currency, supporting consumption and investment

Although inflation is set to decline gradually over the coming quarters, price growth will remain above the Banco Nacional de Angola's single-digit target as the official exchange rate depreciates further, leading the central bank to refrain from further monetary easing until H219

Angola's balance of payments dynamics look poised to improve notably in 2018 and 2019 as rising oil prices bolster the goods trade balance A long-term decline in oil production will however keep the current account in a deficit over the course of our 10 year forecast period While we are factoring in a slow ramp up of investment into both the oil and non-oil sectors on the back of President Lourenço's ambitious reform agenda, potential for slower than anticipated progress suggests that risks to the country's external position are tilted to the downside

Key Risks

Oil prices failing to recover would place increased pressure on the official exchange rate

Excess currency depreciation increases the cost of external debt, posing risks to debt sustainability


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Angolan GDP Growth Will See Tepid Recovery Over The Short Term
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Declining Oil Production Keeping Angolan Current Account In Deficit
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Monetary Easing In Angola On Hold Over H119
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2016)
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Angola Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsCurrency Forecast
Angolan Kwanza Depreciating While FX Liquidity Improves
TABLE: CURRENCY FORECASTS
10-Year Forecast
The Angolan Economy To 2027
Oil Sector Decline Will Weigh On Long-Term Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Angolan President's Consolidation Of Power Will Help Support Reform Momentum
Long-Term Political Outlook
Reform Efforts Will Prove Positive For Long-Term Investment
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF TRADE BARRIER
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVE
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISK
TABLE: WATER RISKS
Global Macro Outlook
Contagion Risks Limited To EMs For Now
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: ANGOLA – MACROECONOMIC DATA & FORECASTS

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