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Angola Country Risk Report Q4 2017

Angola Country Risk Report Q4 2017

Core Views

The election of João Lourenço in the August 2017 general electionwill see the country's current economic status quo remain firmly inplace over the coming quarters. This means the reforms neededto attract foreign investment will see little progress, weighing onprospects for real GDP growth beyond that afforded by an increasein oil production in 2018.

An increase in oil production will see Angola's current account deficitnarrow further over the coming quarters, albeit tempered by a sharpuptick in import growth. Even so, the country's balance of paymentscome under sustained pressure beyond 2018 as a more challengingoutlook for the hydrocarbon sector simultaneously weighs on exportsand investment.

Above target inflation and concerns over social instability will seeAngolan policymakers maintain the kwanza's official peg to theUS dollar over the next six months. That being said, the currencyremains highly overvalued and we expect the country's monetaryauthorities to shift to a more flexible exchange rate regime in 2018,entailing steep depreciation.

An uptick in oil production will support government revenues overthe coming quarters, fuelling a narrowing of Angola's budget deficitto 2019. However, consolidation will be gradual due to increasedrecurrent and capital spending.

The election of João Lourenço as Angola's new president will seeeconomic policy remain largely unchanged over the coming quartersin the Southern African petro-state. Despite the opposition's rejectionof the official result, their challenge in court is unlikely to amount toany lasting uptick in social unrest.


Executive Summary
Core Views
Key Risks To Outlook
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Policy Continuity Under Lourenço Bodes Poorly For Economic Reform
The election of João Lourenço in the August 2017 general election will see the country's current economic status quo remain firmly
in place over the coming quarters. This means the reforms needed to attract foreign investment will see little progress, weighing on
prospects for real GDP growth beyond that afforded by an increase in oil production in 2018.
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
Temporary Respite Masks Structural Vulnerabilities In External Accounts
An increase in oil production will see Angola's current account deficit narrow further over the coming quarters, albeit tempered by a
sharp uptick in import growth. Even so, the country's balance of payments come under sustained pressure beyond 2018 as a more
challenging outlook for the hydrocarbon sector simultaneously weighs on exports and investment.
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Increased Spending Will Slow Budget Balance Recovery
An uptick in oil production will support government revenues over the coming quarters, fuelling a narrowing of Angola's budget deficit to
2019. However, consolidation will be gradual due to increased recurrent and capital spending.
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
AOA: Mounting Pressure Will Encourage Further Devaluation In 2018
Above target inflation and concerns over social instability will see Angolan policymakers maintain the kwanza's official peg to the
US dollar over the next six months. That being said, the currency remains highly overvalued and we expect the country's monetary
authorities to shift to a more flexible exchange rate regime in 2018, entailing steep depreciation.
TABLE: BMI CURRENCY FORECASTS
Chapter 2: 10-Year Forecast
The Angolan Economy To 2026
Oil Price Collapse Leaves
Economy Structurally Weaker
The Angolan economy will struggle to record similar levels of growth to those seen prior to the collapse in oil prices. Limited investment
into the country's dominant hydrocarbons sector will weigh on growth, while structural obstacles undercut more rapid economic
diversification.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Contents
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
New President Inherits Stable Political Environment, Despite Tensions
The election of João Lourenço as Angola's new president will see economic policy remain largely unchanged over the coming quarters
in the Southern African petro-state. Despite the opposition's rejection of the official result, their challenge in court is unlikely to amount to
any lasting uptick in social unrest.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Business As Usual Promises An Uncertain Future
While Angola faces elevated political uncertainty in the years ahead due to the departure of long-time president José Eduardo Dos
Santos, we continue to expect a managed succession whereby power is kept within his own party. Although this will ensure broad policy
continuity, it also means that the prospects for political and economic reform are limited and raises the likelihood of increased political
unrest.
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Labour Costs
TABLE: LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE
Legal Environment
TABLE: BUREAUCRATIC PROCEDURES
Chapter 5: BMI Global Macro Outlook
As Good As It Gets?
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: ANGOLA – MACROECONOMIC DATA AND FORECASTS

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