Angola: Activity falls at softer rate in the fourth quarter of 2020
The economy remained in a challenging position in the final quarter of last year, with GDP falling 5.4% year-on-year amid the lingering impact of the pandemic. The print came in above the 6.2% drop recorded in the third quarter, however. Looking at the year as a whole, the economy recorded its fifth consecutive annual contraction, with GDP shrinking 5.2% over the prior year (2019: -0.6% year-on-year), which marked the steepest drop since 1993.
Looking at the details of the release, the fourth quarter’s improvement reflected a return to growth in the fishing, extractive, financial and real estate sectors. In fact, output in the fishing sector expanded for the first time since the first quarter of last year. Additionally, the contraction in the transport and storage sector softened. Less positively, the performance of the key oil sector, which accounts for roughly one third of GDP, deteriorated; output contracted 10.8% year-on-year in the fourth quarter, down from a 5.5% fall in the third. The sector likely felt the pinch from softer demand dynamics amid the reimposition of lockdown measures globally in the final quarter of last year. Manufacturing output, meanwhile, swung to contraction in Q4.
While the economy is forecast to return to growth this year, the recovery will be slim and output is not expected to return to pre-pandemic levels in USD terms before 2024. The global rollout of vaccinations should firm domestic and foreign demand as restrictive measures are gradually eased, particularly from the second half of the year onwards. However, the balance of risks is tilted to the downside: Uncertainty remains over the speed and efficacy of vaccination programs and, in turn, the global recovery. On top of this, there are obstacles to diversification away from oil, and years of recession have limited income levels and economic opportunities.
However, the recent rally in oil prices bodes well for the outlook. Gerrit van Rooyen, economist at Oxford Economics, added:
“Our growth outlook for 2021 has improved on the back of a rally in oil prices and better expectations for global trade. We forecast real GDP will finally recover – after five straight annual contractions – to show growth of 1.7% this year […]. Nevertheless, we expect a moderate decline in domestic oil output, while continued coronavirus-related restrictions will weigh on the economic recovery.