Angola 2.4% GDP forecast for 2022 is likely “optimistic”, considering the downside risks still presented by the Covid-19 pandemic, according to Eaglestone Securities.
The Angolan government’s 2022 budget proposal recently presented to Parliament (and likely to be approved by mid-December) assumes that economic activity in the country will pick up significantly after a recovery of 0.2% expected this year, advancing 2.4% thanks to positive contributions from both the oil (1.6%) and non-oil (3.1%) sectors.
“We believe this forecast may be optimistic considering the downside risks still presented by the Covid-19 pandemic while remaining dependent on the speed of the vaccination process in the country”, Eaglestone says in its most recent report on Angola. The budget proposal also assumes that oil output will improve slightly to 1.148 million bpd and crude prices will average USD 59.0 (vs. USD 67.5 this year), which the government admits is a conservative estimate.
Next year’s budget proposal amounts to AKZ 18,745 billion, standing 26.8% above the 2021 budget and 11.2% ahead of the expected figure for this year. The proposal assumes that the government will reach a very modest surplus of AKZ 1.5 billion in 2022 (equivalent to 0.0% of GDP) following a surplus of 3.0% expected this year and a deficit of -2.3% projected in the 2021 budget.
The government expects to finance its 2022 budget by once again relying relatively more on public receipts, mainly taxes (57.2% of total revenues), as opposed to debt financing. The projected amount of debt financing is still anticipated to rise though (11.3%) and account for 36.7% of total receipts, as higher financing in the domestic market outweighs the impact of lower overseas financing in the period.
In terms of expenditures, it is worth highlighting that nearly half of public spending is likely to be allocated to debt service payments (debt amortization plus interest).
Preliminary figures indicate that public debt declined to 84.8% of GDP in September 2021, which compares with a historically high 128.7% in 2020.
“This more favorable evolution is due to the impact of the primary surpluses recorded in recent years, as well as the stabilization of the kwanza exchange rate in 2021. That said, it remains imperative for the Angolan authorities to continue to adopt measures to lower public debt levels with the aim of reaching the target of 60% of GDP over the long-term”, Eaglestone sayd.
In order to reach this objective, the non-oil sector primary fiscal deficit will have to remain consistently at a level equal to or below 5% of GDP until 2025, which, in the upcoming election year, the 2022 budget proposal already assumes will not happen, the consultancy adds.