Drop in oil production: Fitch Solutions foresees Angolan GDP to drop to 1.5%
Angolan economy may be close to recession before the end of the year following discovery by global rating agency, Fitch Solutions which saw its GDP growth below expected last month.
According to Fitch Solutions, “From the expected 2.8% growth, the country is now expected to have a 1.5% GDP growth this year given the growing tendency for the declining trend witnessed in oil production”.
The agency announced that “We have now updated our estimates of Angolan GDP growth to 1.5% in 2018, a representative difference from the previous 2.8% we had anticipated, and we expect GDP to grow by 2.3% in 2019, instead of the previous 2.6% estimate, whereas for 2020 we’ll estimate it to hit 2.6%, which is higher than the previous estimate of 2.2% for that year”.
On a memo sent to investors, to which the Portuguese news agency Lusa had access, some other Fitch analysts from the consulting company, which have no ties to the analysis in question, have said that “although Angola will be most likely out of the recession trend for the next few quarters, the economic recovery will be weaker than expected previously, mostly due to the decline in oil production in the country.”
The government had estimated GDP growth to arrive at a 2.2% threshold, in comparison to the 4.6% estimate they’d announced previously, whereas the IMF predicted GDP to get to 2.3% this year.
Private consumption and public investment are adding up to the economy and “they shall make the economic growth move positively in the following years, with great potential coming from foreign investment and international financial aid”, said the analysts, referring to a programme being negotiated in October with the International Monetary Fund, which will add €1.5bn to the state’s treasury.
However, they alerted that “in the long-term, the high exposure of Angola to the volatility of the oil sector will put the country under pressure and could induce the GDP growth estimates to go lower”.
The decreasing trend in GDP estimations emerged after “the announcement, by the Office for National Statistics, of data that shows the GDP had decreased by 2.2% in the first quarter of the year, after it had already registered a negative growth of 2.6% in 2016 and 2.5% in 2017”, the analysts also noted.
Data has been updated also to accompany the changes in terms of estimates of oil production, which Fitch announced would go down over the next few years: “A big increase in production is no longer expected, given that the oil wells ready for exploitation will not be as much as desired” they concluded, stating that production is expected to go down by 1.9%.
