"Following a lower than expected performance of the first quarter indicators, we revised our outlook for growth in Angola's Gross Domestic Product (GDP) from a contraction of 2.3 percent to a drop of 4 percent," reads the commentary on the country's economy.
In the analysis, sent to investors and to which Lusa had access, the analysts of this consultancy held by the same owners of the financial rating agency Fitch Ratings write that "the decline in oil production will strongly influence economic activity, while the non-oil economy will face strong headwinds due to the covid-19 pandemic".
Analysts also warn that despite "the relatively low number of covid-19 infections, 705 as of 21 July, the infection rate has been rising faster since June and if this trend continues, the government may be forced to tighten containment measures again, leading to an even sharper fall in GDP this year.
In addition, they also point out, "if there has been a further spread of the new coronavirus beyond the last quarter of this year, this could prevent private consumption from recovering in 2021, potentially keeping the economy in recession, as oil exports continue to fall.
Nevertheless, current expectations point to a recovery of the economy as early as next year, with an expansion of 0.8%, based on "a modest recovery in private consumption, but the fall in exports and the scarce growth in investment will keep real GDP below the levels of 2020 by 2023".
The oil sector will be the main reason for the drop in economic activity in 2020, keeping Angola in recession for the fifth consecutive year, analysts point out, which anticipate a drop of 7.8 percent in production in 2020, aggravating the 5.7 percent drop seen last year.
Exports will fall 1.3 percent in 2021, smoothing the 8 percent drop this year, but the problems remain: "although stronger private consumption can support profits and therefore investment in consumption-related sectors, in general the adverse operating environment (Angola is in 26th place in the Operational Risk ranking of 48 sub-Saharan African countries), investor interest remains low.
On the other hand, analysts conclude, "the government is expected to resume fiscal consolidation in 2021/2022 as part of the International Monetary Fund program, and this should result in cuts in public investment.
The covid-19 pandemic has already claimed more than 610,000 lives and infected more than 14.7 million people in 196 countries and territories, according to a report by the French agency AFP.
