Ver Angola

Economy

BFA: inflation is expected to accelerate in 2020 and get close to 24 percent

The outlook for inflation in Angola remains negative in the coming months, estimated to reach 24 percent by the end of 2020, according to the economic studies office of Banco Fomento Angola (BFA).

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The information note to which Lusa had access refers that annual inflation, which was 16.9 percent in December, is expected to gradually rise “as a result of the lagged effects of the significant depreciation in October, and should be close to 24 percent in the end of 2020”.

As a result, monetary policy is expected to remain restrictive, also serving to provide stability to the foreign exchange market.

"The National Bank of Angola (BNA) continues to maintain a delicate balance between exchange rate and monetary policy, and the current prospects for inflation in the coming months are negative, giving no room for any relief," says the note.

The document also adds that "the current tools are adequate to deal with liquidity management, with the BNA regulating the supply of liquidity to the market as it deems necessary for its normal functioning".

If the outlook has worsened, "the changes are expected to occur in terms of mandatory reserves, but this does not seem likely for now".

On Monday, after the meeting of the Monetary Policy Committee, the BNA decided to keep the various monetary policy instruments unchanged, with the interest rate at 15.5 percent and the coefficient of mandatory reserves in national currency at 22 percent, 15 percent for foreign currency.

A decision "consistent with the recent performance of the BNA, by maintaining a restrictive monetary policy, following the pause in the lowering of the reference rate by more direct (and effective) tools to restrict liquidity".

According to the BFA note, BNA's interventions in the market, together with the liquidity absorbed in the purchase of foreign currency by banks (from the central bank or from oil companies) “is truly what has weighed on the economy's liquidity, instead of the most conventional reference rate”.

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