"In our base forecast we see the recession continuing this year and next as the recovery of exports does not offset the negative impact of falling public spending, low private consumption, budgetary tightening and reduced private investment," write Standard Bank analysts.
In the most recent report on some African economies, sent to investors and to which Lusa had access, analysts write that "due to both covid-19 and cheap oil, the economy will only temporarily escape recession in 2022, but the risk of remaining in negative growth lasts until 2023".
Standard Bank's central forecast points to a drop of 4.8 per cent in Gross Domestic Product (GDP) this year and 3.1 per cent next year, in addition to the successive economic contractions since 2016, and puts the price of oil at 31.3 dollars per barrel this year and 31.8 dollars in 2021, "significantly lower than the 35 dollars assumed in the revision of the State Budget, which initially estimated the price at 55 dollars per barrel".
The fall in the value of oil, which represents more than 90 percent of Angola's exports and is worth 65 percent of the country's tax revenues, significantly reduces the expected financial inflow into the Finance coffers.
"The balance of payments current account is expected to register a deficit of 9.2 billion dollars, representing 13.3 percent of GDP, as the drop in oil prices will make exports worth 16.7 billion dollars, compared to 34.7 billion dollars last year," the report said.
The document forecasts a budget deficit of 2.1 percent and 2.6 percent of GDP this year and next, forcing the government to resort to 1.5 billion dollars from the Sovereign Fund, which is still insufficient.
"Trying to issue sovereign debt securities in foreign currency [Eurobonds] and seeking to restructure the sovereign debt to China will probably be initiatives to be considered," points out the analysis, which warns that "the total value of interest may be worth as much as 40 percent of revenues," in a context in which the ratio of debt service (repayments plus payments) to GDP rose from 91 percent in 2019 to 113 percent this year.
Thus, they point out, the magnitude of the fiscal challenges "will probably force Angola to seek external financing, which may come in the form of an annual issue of 3 billion dollars in Eurobonds and a restructuring of bilateral debt with China," but analysts conclude, "both options are challenging".