Country Report Angola November 2012

Country Report Angola November 2012

Outlook for 2013-17

• The ruling party, Movimento Popular de Libertação de Angola (MPLA), is set to continue its dominance of the political system, by virtue of its control of government resources and overwhelming majority in the National Assembly.
• The long-serving president, José Eduardo dos Santos, may step down during this term and hand over power to the former Sonangol chief, Manuel Vicente.
• Emboldened by the improvement in their performance at the polls in the August 31st election, opposition parties will switch their attention to the long-delayed municipal elections, which have been promised for 2013 or 2014.
• A steady rise in oil output and investment will drive average real GDP growth of 6.4% in 2013-17. We forecast that crude output will rise from an average of 1.78m barrels/day (b/d) in 2012 to 2.23m b/d in 2017.
• Inflation slowed to a multi-decade low of 9.7% in September. Assuming that structural measures gradually address underlying distortions, we expect inflation to decline further and to remain in single digits in 2013-17.
• Owing to high oil prices, the current-account surplus is estimated at 13.1% of GDP in 2012. Despite high oil revenue, rapid import growth driven by capital spending will erode the current-account surplus to 2.5% of GDP in 2017.

Review

• There were several new faces in Angola's new cabinet, named in September. Despite the inclusion of some younger and reform-minded technocrats, power is likely to remain centralised within the presidential circle.
• Portuguese-Angolan relations are being tested by a judicial investigation in Lisbon into alleged fiscal fraud and money-laundering.
• A visit to Angola by the Chinese vice-minister of trade, Ji Jinzao, at the end of October led to several new deals and reinforced firm ties with China.
• José Massano, the governor of the Banco Nacional de Angola (the central bank), appears to have ruled out any reduction in interest rates for the remainder of 2012, warning that it would not "support price containment".
• Angola has publicly launched a sovereign wealth fund with starting assets of US$5bn. The IMF has long called for an "oil stabilisation fund" to help buffer the economy against potential oil price shocks.
• Oil output has increased in 2012 but not quite reached the levels we expected. We have trimmed our oil production estimate for 2012 to 1.78m b/d (1.81m b/d previously) and our real GDP growth estimate to 7% (8% previously).
• The Angolan authorities expect iron ore production to restart in 2014-15, after a 30-year hiatus.

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