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Angola GDP growth to speed to 9.1 pct on oil output
by Shrikesh Laxmidas and Vuyani Ndaba

Reuters Translate This Article
27 June 2012

LISBON/JOHANNESBURG (Reuters) - Angola is set to return to strong economic growth this year as a rebound in crude output opens up new oil fields and existing ones complete maintenance cycles, a Reuters poll showed on Wednesday.

The median forecast of 12 economists showed gross domestic product (GDP) in Africa's second largest oil-producer after Nigeria would grow 9.1 percent in 2012.

Oil output in Angola came in below estimates last year due to technical problems and maintenance at some fields, crimping economic growth to just 3.4 percent compared to the government's initial prediction of 7.6 percent.

With fields such as BP's Plutonio back on line, and recently opened sites including Total's Pazflor gaining output, the government expects to produce 1.8 million barrels per day (mbpd) of crude this year, up from 1.64 mbpd in 2011.

Maintenance at Total's giant Girassol platform this month means exports in July will be the lowest since June 2011, but the government has said this will not affect its growth and output goals for the year.

Provisional loading schedules showed last week that exports are set to rebound to 1.81 mbpd in August after the completion of maintenance at the Girassol field.

Crude output represents 45 percent of Angola's GDP and over 90 percent of export revenues.

'We are very bullish on Angola's growth prospects, with the main driver being increased oil production,' said Shilan Shah, Africa Economist at London-based consultancy Capital Economics.

The positive outlook signals a turnaround in Angola's prospects after an oil price slump in 2008 caused growth to brake to 2.4 percent in 2009 after an average expansion of 15 percent each year between 2002 and 2008.

Increasingly, more analysts in the Reuters monthly oil poll are starting to see Brent prices averaging below $100 a barrel over the next two years on as doubts about medium-term economic growth outweigh concerns about oil supplies intensify.

Oil gained on Wednesday supported by tighter North Sea oil supply, while strong U.S. data also bolstered the demand outlook, offsetting concern European leaders would fail to solve the region's debt crisis at a meeting this week. Brent crude was up 56 cents to $93.58 a barrel by 1452 GMT.

Analysts in the Angola poll are split though on whether oil prices will fall further or rebound until the end of the year. The median growth forecasts for this year and next have been nudged down from the 10.0 percent and 7.6 seen in February.

They agree that Angola's prudent option of forecasting an average oil price of $77 per barrel in this year's budget means it can continue producing at current levels.

'They (the government) have been conservative in their budgeting and we don't see a scenario of global market prices falling below their forecasts,' said Celeste Fauconnier, Africa Analyst at Rand Merchant Bank (RMB).

She added that investment in a new $10 billion liquefied natural gas plant in northern Angola would boost growth but the outlook was at a significant risk from oil prices falling.

Economists expect Angola to continue posting strong growth in 2013, with the median forecast coming in at 7.2 percent, as the government ramps up oil output to reach a target of 2 mbpd in 2014.

The economy of Nigeria, Africa's most populous nation and contender to South Africa for the biggest engine in the continent is likely to grow at 7.0 percent this year, with the latter managing a paltry 2.8 percent.

INFLATION SEEN STABILIZING

After ending last year with year-on-year inflation at 11.38 percent, below a target of 12 percent, the government earned praise from the IMF and analysts for its monetary stance, which included introducing a benchmark interest rate to guide policy.

It now seeks to cut inflation further to 10 percent by the end of 2012. Analysts say, however, that this goal may be challenging to meet this year.

'It will be very difficult to reach this goal, as besides the problems of weak supply logistics we also see money supply growing thanks to a new foreign exchange law for the oil sector which came into force in May,' Capital Economics' Shah said.

The law will force oil firms to pay taxes in foreign currency through accounts in Angolan banks, with analysts expecting at least $10 billion in new funds to pass through the country's banking system each year.

The poll saw inflation averaging 10.9 percent this year and 10.1 percent next, but economists see the government struggling to cut inflation into the single-digit level unless supply logistics, especially transport infrastructures, improve to satisfy strong internal demand.

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