Angola’s oil-dependent economy is set to slow this year, key infrastructure projects will be shelved and swathes of social spending are facing the chop as a global crude price slump takes its toll on Africa’s second-biggest producer. Oil accounts for around half of Angola’s GDP, 80% of tax revenues and 90% of export earnings.
Angola’s cabinet last week sent a revised 2015 budget to parliament, cutting the assumed oil price to $40 a barrel, from $81 previously projected, and slashing $14-billion off planned spending, the finance ministry said.
The government’s failure to shield sub-Saharan Africa’s third largest economy from tumbling oil prices is likely to intensify public anger towards President Jose Eduardo dos Santos, who has been accused of enriching a political elite and leaving the poor behind during his 35 years in power.
Samantha Singh, analyst at Standard Bank said she expected Angola to post a budget deficit of around 8.1% of GDP, while the kwanza was likely to weaken to new record lows against the US dollar and there was further upside to inflation, currently at 7.5%.
“Many projects will not happen and that will have a big impact on the companies and Angola’s economy,” said Ricardo Gomes, president of the Portuguese construction lobby group AECOPS, which represents companies like Mota-Engil, Soares da Costa and Teixeira Duarte.
China may look to fill the infrastructure gap by capitalising on lower oil prices to facilitate the expansion of its construction firms, who have played a dominant role in Angola’s economic development.
