2013-10-23 07:37:18 - New Country Reports market report from Business Monitor International: "Angola Business Forecast Report Q4 2013"
Following an impressive return to form in 2012, we remain reasonably bullish on Angola's economic growth prospects over the next five years. We expect real GDP expansion of 7.3% in 2013 and 6.3% in 2014 on the back of surging fixed investment and rebounding oil production.
Twelve months since the one-sided re-election of President Jose Eduardo dos Santos and his ruling Movimento Popular de Libertacao de Angola (MPLA) there has been little change to the political status quo. With the president giving little away on the topic of succession, our overarching view over the short-to-medium term is one of continued stability.
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With inflation remarkably stable at close to 9.0% - a level it has hovered around
since the end of last year - the monetary authorities have shifted their focus firmly towards stimulating growth. The Banco Nacional de Angola have enacted 50bps worth of interest rate cuts so far in 2013 and we expect monetary policy to remain accommodative over the coming quarters.
Our outlook for Angola's balance of payments position remains broadly favourable and despite a vulnerability to external shocks, we believe Angola's external position is strong by regional standards. Having peaked at an estimated 11.8% of GDP in 2011, we forecast Angola's current account surplus to narrow steadily to 5.3% of GDP by 2016.
Major Forecast Changes
We have adjusted made some adjustments to our forecasts for Angola's fiscal accounts this quarter. The revision is mainly due to the recent rally in global oil prices, driven in part by developments in Syria. We now believe Angola will post a narrower-than-anticipated budget deficit in 2013 on the back of increased oil revenues. We are projecting deficits worth 2.7% of GDP in 2013 (revised up from 3.5%) and 4.5% in 2014 (revised down from 3.4%).
Key Risk To Outlook
While we expect oil production to contribute positively to GDP growth over the medium term (before peaking around 2018) as a number of major projects start production, our forecasts remain subject to the myriad uncertainties associated with oil production and exploration in Angola, as well as to volatility in global oil prices.
Given that our forecasts only include planned oil projects, the upside potential posed by the country's vast and as yet unexploited sub-salt reserves pose a major upside risk to our forecasts over the medium-to-long term.
Although inflation has been remarkably stable in recent quarters, Angola's remains susceptible to fluctuations in the cost of goods and services given its heavy dependence on imports. A sharp rise in regional food prices, caused by drought for instance, would pose a significant downside risk to our forecasts.
Partial Table of Contents:
Major Forecast Changes
Key Risk To Outlook
Chapter 1: Political Outlook
BMI Political Risk Ratings
Political Stability Assured, But Frustration Building
- Twelve months since the one-sided re-election of President Jose Eduardo dos Santos and his ruling MPLA there has been little change to the political status quo. With the president giving little away on the topic of succession, our overarching view over the short-to-medium term is one of continued stability.
Long-Term Political Outlook
Path To Political Inclusion Uncertain And Slow
- 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 concentration of power, both political and economic, presents the key challenge to economic development and risk to political stability over the coming decade.
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Solid Growth Ahead, But Challenges Remain
- Following an impressive return to form in 2012, we remain reasonably bullish on Angola's economic growth prospects over the next five years. We expect real GDP expansion of 7.3% in 2013 and 6.3% in 2014 on the back of surging fixed investment and rebounding oil production.
TABLE: ANGOLA - ECONOMIC ACTIVITY
Balance of Payments
C/A Surplus To Narrow But Remain Comfortable
- The outlook for Angola's balance of payments position over the medium term remains favourable. Over the coming years we expect the current account surplus to remain firmly in the black, albeit narrowing gradually due to soaring imports and lower oil prices.
TABLE: CURRENT ACCOUNT
Lower Borrowing Costs Support Growth Agenda
- The Banco Nacional de Angola's decision to lower the policy rate by 25bps to 9.75% is in line with our expectations that, with economic growth high on the agenda and inflation contained, monetary policy will remain accommodative over the coming quarters.
TABLE: MONETARY POLICY
Successive Fiscal Deficits Ahead
- The recent rally in global oil prices, driven in part by developments in Syria, is likely to see Angola post a narrower than anticipated budget deficit in 2013 on the back of increased oil revenues. We expect the deficit to widen in 2014 due to a significant moderation in oil prices and a major government spending programme. We now forecasting a shortfall of 2.7% of GDP in 2013 and 4.5% in 2014.
TABLE: FISCAL POLICY
Chapter 3: 10-Year Forecast
The Angola Economy To 2022
The Next Decade: New Priorities, Familiar Challenges
- Having averaged double-digit rates of real GDP expansion since the end of civil war in 2002, we expect growth in Angola over the next ten years to come at the more moderate, but still robust level of 6.5% per annum. The successfully implemented fiscal and macroeconomic reforms of 2009-2012 allied to vast, albeit moderating oil revenues, will support the government in its diversification efforts, with a major scaling-up of infrastructure investment-both social and economic - at the heart of its plans.
Full Table of Contents is available at:
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