Ver Angola


Covid-19: Government assesses economic risks, but does not revise budget yet

The Government is analysing the economic risks associated with the Covid-19 epidemic, namely in terms of price, production and sale of oil, but will not review the General State Budget (OGE) for the time being.

: Ampe Rogério
Ampe Rogério  

"We are following all developments closely, with care and realism, and we hope that the impacts are as minor as possible," said Finance Minister Vera Daves on Saturday in Luanda during a meeting with journalists.

The Finance Minister stressed that the issue is not limited to the Angola-China link (China is Angola's main trading partner) because the impact is not limited to countries that have a more direct relationship with China, but "will touch several economies due to the interdependence in terms of the supply of goods and movement of people.

According to Standard Bank analysts, sales from China, where the coronavirus outbreak occurred, Angola accounted for 13.3 percent of total imports, and Angolan oil sales to the Asian giant were worth almost 70 percent of the total.

Vera Daves admitted that a scenario of lower economic growth "will have an impact on the management of the treasury and public debt," but did not provide details about the measures that the government will adopt to minimise the risks for budget execution in 2020.

The director of the Ministry of Finance's Office of Studies and Statistics (MINFIN), Emílio Londa, said that in addition to the additional financial efforts needed to prevent and combat the epidemic, several negative impacts for the country are being analysed, such as the drop in the price of oil and the possible increase in the price of imported goods, noting that Angola is essentially an importing country.

There are also concerns about pressure from the Organisation of Petroleum Exporting Countries (OPEC) to reduce oil production due to the greater difficulty in selling oil worldwide.

It also pointed out secondary effects resulting from the fall of the economy and world stock markets, but the greater or lesser gravity of the impacts will depend on how quickly one returns to normality.

The government will also review its economic programming for the period between February and April, including indicators such as Gross Domestic Product (GDP), inflation or exchange rates, "which would be done with or without coronavirus", said the same responsible.

"We are in a phase of some uncertainty", admitted Emílio Londa, adding that reprogramming does not necessarily imply a revision of the GSB.

"The SGB is only revised when the changes in assumptions are relatively large. Only after all this analysis and depending on the results will the executive conclude whether or not it is necessary. You can't revise the budget every time there's an unexpected event", he commented.

The director of the Public Debt Management Unit of MINFIN, Walter Pacheco, complemented that the Covid-19 may also bring positive effects, namely the reduction of interest rates, which would allow for a saving of 392 million dollars in Angola's external debt.

He considered that the price of a barrel of oil should be evaluated according to the average of the last few months and taking into account a perspective of price developments in the coming months.

"Assuming an average of 50 to 52 dollars, the drop in cash would be around 450 million dollars, which would mean a deficit of between 60 and 90 million dollars," said Walter Pacheco.

On Friday, the price of the Brent barrel, a reference for international markets, sank 6 percent to around 47 dollars on the London futures market due to the contraction in demand in the face of the spread of the coronavirus.

The state budget for 2020 was based on the average price of a barrel of oil of 55 dollars, an average daily production of 1.436.900 barrels and an inflation rate of 25 percent.


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