Angolan economy set for further tightening

Significance

The Fund now expects economic growth to flat-line this year against the 2.5% growth forecast made just six months ago; inflation is now expected to reach 45.0% by year-end compared with the previously projected rate of 19.2%; and public debt could rise to 77.7% from the original estimate of 70.1%. If the government resumes negotiations on the EFF -- possible after elections in August -- it could face a more severe adjustment than originally envisaged and a harder landing for the economy.

Impacts

• Maintaining a low budget oil price to shore up reserves could become untenable given likely revenue shortfalls in 2017.
• Negotiating favourable terms for up to 4.5 billion dollars in available IMF funds will be more difficult than earlier this year.
• The government may resort to more administrative measures to try stabilise the economy after introducing price controls to curb inflation.