The consultancy Capital Economics believes that Angola's economy will grow by 1.5% this year and enter recession next year, contracting by 0.5% due to the effects of low oil production and the depreciation of the kwanza.

Angola's economy will slow down due to a combination of low oil production and the effects of the recent fall in the kwanza in 2024 and 2025″, analysts write in a commentary on the evolution of the Angolan economy.

In the note, sent to investors and to which Lusa has had access, the analysts at Capital Economics write that "GDP is expected to expand by only 1.5% this year, followed by a contraction of 0.5% in 2024" and admit that "the forecasts are well below the consensus of analysts, who expect growth of 2.1% and 2.8% for this year and next".

The note, released following the downward revision of the government's growth forecast, which now points to economic expansion of 0.9%, recalls that the Angolan economy grew by 2.7% in the last quarter of last year and 0.4% in the first quarter of this year, and adds that "it is doubtful that things will improve in the coming quarters".

The reduction in the oil sector and delays in investments in this industry "mean that production will fall further, which, together with lower oil prices compared to 2022, has caused a reduction in the current account balance," say the analysts, who also predict that inflation will rise significantly this year.

The devaluation of the kwanza, which lost 40% of its value against the dollar, the imposition of austerity measures, including the cut in fuel subsidies, "will push inflation over 25% in the coming months," estimate the analysts, who also predict that the central bank will respond with a 300 basis point rise in the key interest rate, to 20%.

With regard to debt payments, which become more expensive with the devaluation of the currency, since most of the debt is in foreign currency, Capital Economics foresees a rise in the debt to GDP ratio, but believes that "Angola will manage to avoid a default", warning, nevertheless, that "avoiding a sovereign default will be more difficult if there is a sudden tightening of external financing conditions or a fall in oil prices". (Lusa)