Angola: Recession deepens in Q1 before full impact of Covid-19 was felt
The economy remained in recession in the first quarter, and the downturn is expected to have intensified in the second quarter amid the full fallout from the global pandemic. In the three months ending in March, output contracted 1.8% year-on-year, with the economy shrinking three times as fast as in the prior quarter (Q4 2019: -0.6% year-on-year).
The stronger downturn came on the back of a double-digit contraction in the trade sector amid the state of emergency, which has weighed heavily on economic activity at home. Restrictive measures to curb the spread of Covid-19 also dragged notably on the mining and quarrying sector. Meanwhile, the oil sector—which accounts for roughly one-third of GDP—shrank for the 16th consecutive quarter, although the pace of the fall eased compared to the prior quarter (Q1: -1.7% yoy; Q4: -6.5% yoy). The softer fall likely reflected developments in the final stages of the quarter, as the global pandemic and associated lockdown measures weighed heavily on economic activity and demand for oil, while the market remained well supplied. In fact, Cabinda oil prices fell by over a fifth on average in the quarter, although production accelerated in the three months.
Looking forward, the economic recession is expected to have worsened in the second quarter amid the full impact from the Covid-19 fallout. Prices for oil collapsed globally, and Cabinda prices fell to an over two-decade low in April. While prices recovered gradually since then, they remained below the levels seen in the first quarter and markedly below last year’s prices. At the same time, oil production fell owing to the OPEC+ production curb deal in May. External demand, meanwhile, remained frail given that most of the world was still under lockdown.
Looking beyond Q2, while the economic slump is expected to ease from the second quarter onwards, the economy will nonetheless likely remain in a deep recession amid depressed international trade levels and weakened aggregate demand on the back of lingering restrictive measures, which could be tightened given the recent spike in new cases.