Boston, MA -- (SBWIRE) -- 06/07/2013 -- Core Views

The outlook for the Angolan economy over the next few years remains positive, with the Southern African country remaining among the region's top performers. As in recent years, we expect growth in 2013 and 2014 to be driven by the non-oil sector and - following a highly expansionary 2013 budget - by public infrastructure investment programs in particular.

The outlook for inflation in 2013 should remain broadly supportive of the decidedly expansionary fiscal and monetary stance adopted by the authorities since the start of 2013. We expect price conditions to remain relatively stable over the coming months thanks primarily to a well-supported exchange rate, with BMI forecasting year-end CPI growth of 8.8% year-on-year.

While we believe the government will be granted the patience to make good on the ambitious social spending plans outlined in the February budget, it will come under growing pressure from a population increasingly willing to voice its concerns publicly.

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Major Forecast Changes

We have downgraded our forecasts for the Angolan economy in 2013 and 2014 from 8.7% to 7.3%, and from 6.7% to 6.3%, respectively, on the back of disruption and delays to oil production. However, our outlook for the economy in 2013 and over the medium term remains a positive one, underpinned by robust non-oil sector growth and strong growth in domestic demand.

We have made downward revisions to our projections for Angola's current account surplus between 2013 and 2017 on the back of the above delays and disruptions to planned oil production. Whereas our previous forecasts had the surplus coming in at 13.5% of GDP in 2013, we now see this coming in at around 9.6% on account of lowered expectations for growth in exports.

Key Risks To Outlook

While we expect oil production to contribute positively to GDP growth over the medium term (before peaking around 2016) as a number of major projects start production, our forecasts remain subject to the myriad uncertainties associated with oil production and exploration in Angola, as well as to volatility in global oil prices.

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