Angola’s Kwanza: A Period of Growth Amidst Instability

Analysts at the Economist Intelligence Unit (EIU) predict that the Kwanza, Angola’s currency, will remain unsteady from 2024 to 2028.

They also forecast an average economic growth of 3.5% during this period. The EIU’s recent report, accessed by Lusa today, sheds light on this topic.

It suggests the Kwanza will stabilize after a big drop in value – about 34% – by mid-2023. Despite this stabilization, risks of fluctuation will linger in the next few years.

These risks are linked to falling oil prices. However, an increase in oil production might offset these risks.

The EIU believes that from 2024 to 2025, the Kwanza will be relatively stable against the US dollar. This follows the big drop in 2023.

This stability comes from the support of foreign exchange reserves. The US Federal Reserve plans to tighten monetary policy around mid-2024.

This action might weaken the US dollar, helping to prevent the Kwanza from losing more value. However, there’s a catch.

Angola must repay foreign debt in 2024. This repayment will put pressure on its foreign exchange reserves, increasing the risk of short-term exchange rate volatility.

Angola’s economic prospects look mostly positive. This positivity stems from the oil sector and recovery in non-oil sectors.

These sectors include gas, mining, services, and construction.

The EIU estimates that Angola’s Gross Domestic Product (GDP) growth will be 3.5% on average. By 2028, this could reach 4%.

In 2024, Angola plans to focus on paying off debt and spending on social needs. Other expenses will see cuts.

The EIU notes a planned 5% salary increase for public sector workers in 2024. But in real terms, this is actually a pay cut.

It will reduce the salary portion of GDP from 4.6% in 2023 to 4.2% in 2024.

Oil Sales and Prices

Global oil prices are predicted to rise. They might average $84.8 per barrel, much higher than the government’s estimate of $65 per barrel.

This increase could boost the ratio of revenue to GDP.

It might even lead to a small surplus in the budget – 0.5% of GDP in 2024. This is a change from an estimated deficit of 0.7% in 2023.

Inflation in Angola is expected to keep increasing in 2024. This is due to higher global prices for oil and raw materials.

The average inflation rate is projected to be 18.7% in 2024 and 21.2% in 2025. These rates are higher than the 13.1% estimated in 2023.

From 2026 to 2028, new refineries in Angola could improve the supply of fuel. This improvement may limit the impact of the Kwanza’s devaluation on inflation.

Even with fuel prices becoming more liberal, the EIU expects a positive effect. It forecasts a decrease in food prices and fuel costs.

The removal of subsidies will also help. These factors could keep inflation to an average of 14.3% each year during this period.

More: Angola news in English, every day from The Rio Times.

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