Angola: World Bank sees economy shrinking 4pct this year, rebounding by 3.2pct next

The World Bank expects Angola’s economy to shrink by 4.0% this year before enjoying a significant recovery next year, with gross domestic product set to expand by 3.2%, sustained by oil and investment.

The forecasts came in a report, titled ‘Africa’s Pulse’, that was released in Washington on Thursday, the same day that Angola’s government updated its own macroeconomic forecasts, projecting GDP shrink by 2.8% this year before expanding 1% next.

In Angola, the World Bank report notes, the Covid-19 crisis has pushed the economy into the fifth year of recession, with GDP expected to fall by 4.0%; a partial recovery is expected in 2021, with GDP growing 3.2%, sustained by strengthening of the oil sector, especially due to the end of the Organization of Petroleum Exporting Countries (OPEC) production cut, and a return to investment to halt the structural decline in production, 

The report, which looks at African economies across the board, notes that Angola, the second largest oil producer in sub-Saharan Africa, saw its GDP contract by 1.8% in the first quarter of this year due to the consequences of the Covid-19 pandemic and declining oil prices.

Oil production, the World Bank report adds, fell in April and May; although it recovered slightly in June that suggests that the economy is likely to shrink further in the second quarter of the year.

After shrinking by 3.3% this year, it states, the economcy should grow by 2.1% next year and 3.2% in 2022.

According to the report, World Bank analysts estimate that Africa as a whole will enjoy economic growth of 2.1% next year – still short of the 2.9% recorded last year. But the 3.3% recession projected for the continent this year – due to the Covid-19 pandemic and the fall in the price of raw materials – will be the deepest in last 25 years, according to the institution. 

The report’s baseline is for the rate of increase in new coronavirus infections to continue to slow, with new outbreaks not sufficient to prompt further lockdowns; if the pandemic is longer than expected or there is a significiant second wave in sub-Saharan Africa, the economy could grow by only 1.2% next year and 2.1% in 2022, it calculates.

In Angola, the World Bank forecasts that public finances will go into deficit as a result of the effects of the pandemic, to the equivalent of about 3% of gross domestic product. That is still better than the average for the region, which is expected to be 5.9% this year.