Angola is expected to record two consecutive years of economic contraction in 2019 and 2020, according to forecasts by the Economist Intelligence Unit (EIU), which projects negative rates of 3.8% and 3.6%, respectively, before returning to growth at an average rate of 4.2% per year between 2021 and 2023.
The EIU report on Angola begins in the worst way when in terms of economic growth, with the assertion that Angola’s economic outlook remains weak, followed by the finding that oil production fell by almost 10% in 2018 to an average of 1.478 million barrels per day, due to the fact that several wells are already at the end of life and no investment has been made in new ones.
The document noted that oil production will continue to decline over the next two years, remaining below the 1.481 million barrels per day limit imposed by the Organization of the Petroleum Exporting Countries (OPEC), due to the fall in oil prices and postponement of investment.
“Despite the introduction of numerous fiscal incentives, Angola has had great difficulty in attracting international investment in resources in deep and ultra-deep waters, where the cost per barrel is higher,” it said.
The economy will also not benefit from an increase in expenditure by the State, as the loss of tax revenue due to the drop in oil prices and the decrease in production will lead to the government having difficulty in injecting liquidity into the economy.
According to the EIU, the annual average growth of 4.2% from 2021 to 2023 will be due to stronger growth in the agricultural, mining, civil construction, industrial and services sectors, which will be supported by the increase in credit due to a drop in inflation.
“During this period, end-of-life field production levels will continue to decline, while production in deepwater and ultra-deepwater fields will continue to be postponed due to the country’s poor business environment, exploration costs and the fact that the cost per barrel is higher here,” it said.
The EIU report said that the growth of the non-oil economy in Angola, which will occur after 2021, along with a sharp decline in oil production, will allow the country’s government to adopt a more favourable attitude towards conducting business.