Lusa - Business News - Angola: Country grows 0.4% in 2021, public debt rises to 134% in 2020 - IMF

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Lusa - Business News - Angola: Country grows 0.4% in 2021, public debt rises to 134% in 2020 - IMF

Washington, Jan. 20, 2021 (Lusa) - The International Monetary Fund (IMF) on Wednesday downgraded its growth forecast for Angola, anticipating a recovery of 0.4%, and public debt of 134.2% last year and 119.9% this year.

"Public debt is expected to rise from 107% of GDP in 2019 to 134% in 2020; projections for 2020 mainly reflect the depreciation of the exchange rate and the fall in oil prices following the shock triggered by the Covid-19 pandemic," IMF analysts wrote in the report detailing the analysis to the fourth review of the fiscal adjustment programme.

According to the paper released on Wednesday in Washington, public debt is expected to fall this year to 120% of GDP, reflecting the beginning of the recovery in growth and a restrictive fiscal outlook, compared to the 107.5% forecast in September.

The government debt to GDP ratio is expected to remain high over the projection horizon and will take slightly longer than previously projected to converge to the medium-term anchor of 60%, which is now only expected to be reached in 2028.

Nevertheless, the IMF said, following the argument put forward in a Lusa interview on Monday, that public debt remains sustainable, although subject to very high risks.

This deterioration in forecasts is accompanied by a sharp reduction in the growth forecast for the Angolan economy, which despite being expected to come out of recession this year, will grow by only 0.4%, which compares with the 3.2% forecast in September, in the third revision of the economic adjustment programme.

"The sustained recovery of growth, based on structural reforms that unblock the main obstacles to growth in Angola, such as strengthening the business climate and governance, will complement the fiscal consolidation that is in our baseline scenario and reduce debt substantially in 2025," the IMF experts added.

Throughout the text, the IMF leaves a lot of praise for the programme's implementation and the authorities' commitment to follow the roadmap of economic policies and structural reforms but warns that the risks are high due to the heavy dependence not only on the oil sector but also on external shocks.

"Despite improving, the outlook for economic developments remains highly challenging due to the slow and uncertain recovery from the Covid-19 shocks," they said, adding that being a highly oil-dependent economy, it has suffered from weaknesses in that sector, such as falling output and only a partial recovery in international prices recently.

These shocks led to the fifth year of recession and difficulties, marked by the rise in the debt to GDP ratio to very high levels, driven by the recent depreciation of the exchange rate.

"Even so, strong fiscal performance and active debt management are preparing the ground for a gradual economic recovery and a reduction in debt-related vulnerabilities," the experts who met virtually with the Angolan authorities at the beginning of December said.

The programme's performance, they said, has been adequate since the third review, all the indicators up to September have been met, except two: the central bank's assets over the central government, and the volume of public debt.

Angola failed to meet some of the agreed targets and indicators, notably concerning the financial sector and central bank provision but presented arguments the IMF technical team considered valid.

Regarding the risks of implementing the programme that finishes at the end of the year, the Fund said that there were significant risks, mainly regarding the level of public debt, oil prices and the fragile economic environment.

However, they stated that to address these risks, the authorities have kept the programme on track, notably by presenting a prudent 2021 budget, implementing an effective debt management strategy, allowing the exchange rate to adjust to shocks, pursuing a sound monetary policy and continuing progress on important structural reforms.

Angola has been under technical and financial assistance from the IMF since the end of 2018 and will receive $4.5 billion by the end of the year to deal with difficulties and re-launch the economy, as well as technical advice on defining economic policies.

MBA/IMYN // ADB.

Lusa

Agency : LUSA
Date : 2021-01-21 10:19:36

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