Africa-Press – Angola. The economic research office of Banco Fomento Angola (BFA) believes that Angola’s economy may grow by up to 4% this year but warned of the dangers of an expansionist policy in an election year.
“For the total economy, the Finance Ministry forecasts growth of 2.4%, while we expect an increase in economic activity of between 3.5 and 4.0%,” according to an analysis of Angola’s state budget for this year.
In the report sent to clients to which Lusa had access, the BFA analysts said that “the budget is expansionist to try to stimulate the economy,” but warned that “the most worrying sign concerning expenditure comes from the significant increase in spending on General Expenditure.
They add, “spending that, to a large extent, does not seem to be allocated to specific programmes; in that sense, it becomes more difficult to monitor them, and the state’s own planning,” in a year that will be marked by elections, scheduled for the end of August.
In the document, the analysts point out that, as usual, the barrel price forecast is conservative, not only in light of historical trends but also international forecasts and the current price of over US$80 per barrel. Thus, while BFA expects the price of each barrel to be US$72, Luanda expects a price of US$59, which is 19% below the average analyst forecast, BFA said.
BFA, which expects Angola to end 2021 with growth of between 1 and 1.5%, moving out of recession, said that despite conservatism in some of its forecasts, the budget “is a clear application of expansionist budgetary policy, to try to stimulate the economy (despite the movement in that direction being slight), which can be seen by the movement of the non-oil primary balance, which worsens from -4.5% to -5.7% in the government’s expectations,” which compares to a forecast of -6.2% from the bank’s analysts.
For BFA, the main elements of the expansionist policy in an election year “are the decrease in VAT for a series of foodstuffs, the increase in spending on current transfers (especially subsidies) and the rise in spending on goods & services.”
The draft law on the 2022 State Budget was approved on 14 December with 135 votes in favour from the Popular Movement for the Liberation of Angola (MPLA), 53 votes against from the National Union for the Total Independence of Angola (UNITA), the Broad Convergence for the Salvation of Angola – Electoral Coalition (CASA-CE) and independent lawmakers and three abstentions from the National Front for the Liberation of Angola (FNLA) and Social Renewal Party (PRS).
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