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Angola’s Economy: Past, Present and Future

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  1. Angola’s Economy: Past, Present and Future Ricardo Gazel, World Bank Senior Economist and Acting Country Manager Viking Club August 27, 2009

  2. Angola’s Economy: Past, Present and Future • Recent Past: High Rates of Growth • Present: The Mother of all Crisis and the Impacts on Angola’s Economy • Future: Medium and Long Runs

  3. I. Recent Past: High Rates of Growth • 1.1 Economic Growth • 1.2 Inflation • 1.3 External Sector • 1.4 Public Sector • 1.5 Social Gains

  4. Nominal and Real Economic Growth

  5. I. Recent Past: High Rates of Growth • 1.1 Economic Growth • 1.2 Inflation • 1.3 External Sector • 1.4 Public Sector • 1.5 Social Gains

  6. Inflation

  7. I. Recent Past: High Rates of Growth • 1.1 Economic Growth • 1.2 Inflation • 1.3 External Sector • 1.4 Public Sector • 1.5 Social Gains

  8. Trade Balance – US$ billions

  9. Oil Exports (Volume and Price)

  10. Net International Reserves (US$ Millions)

  11. External Debt including Arrears

  12. External Debt / GDP

  13. I. Recent Past: High Rates of Growth • 1.1 Economic Growth • 1.2 Inflation • 1.3 External Sector • 1.4 Public Sector • 1.5 Social Gains

  14. Fiscal Revenues(Billions of Kwanzas)

  15. Fiscal Results(Billions of Kwanzas)

  16. Composition of Public Expenditures

  17. I. Recent Past: High Rates of Growth • 1.1 Economic Growth • 1.2 Inflation • 1.3 External Sector • 1.4 Public Sector • 1.5 Social Gains

  18. Social Gains in the Last Years • Reduction of Poverty • Improved Human Development Indicators • Gains in the fight agains HIV/AIDS, malaria, etc.

  19. Angola’s Economy: Past, Present and Future • Recent Past: High Rates of Growth • Present: The Mother of all Crisis and the Impacts on Angola’s Economy • Future: Medium and Long Runs

  20. The Mother of all Crisis • Financial Crisis: • Stock Markets Collapsed in many Advanced and Developing Countries • Nacionalization of Fannie Mae and Freddie Mac • Bancrupcy of Banks and Insurance Companies • Liquidity Crisis • Others

  21. The Mother of all CrisisGrowth Rates Estimates(IMF – April 2009)

  22. Impacts in Angola • Financial Market and Foreign Investment • Remitances and Foreign Aid • Real Economy – Prices of Primary Products

  23. Financial Market and Foreign Investment • Likely small as: • No stock market • No strong connection of domestic bank system with international financial markets (except via Portuguese banks) • Small interbaking credit market • Low loans to deposit ratios

  24. Impacts in Angola • Financial Market and Foreign Investment • Remitances and Foreign Aid • Real Economy – Prices of Primary Products

  25. Remessas e Ajuda Extrangeira • Low Level os Remitances compared to other African Countries • Outflow Remitances Larger than Inflow Remitances • Foreign Aid share of Budget is Marginal

  26. Impacts in Angola • Financial Market and Foreign Investment • Remitances and Foreign Aid • Real Economy – Prices of Primary Products

  27. Real Economy Economic Growth Inflation External Sector Public Sector Risks

  28. Different Estimates of GDP Real Growth Rate for 2009

  29. Oil ProductionMillion Barrels per DayOPEC Monthly Oil Market Report

  30. Oil ProductionMillion Barrels Day OPEC Monthly Oil Market Report

  31. Others Sectors • Sector Positive Negative • Agriculture and Fishing High • Extractive Industries Low • Oil and Gas Low • Diamants e other extractives High • Manufacturing Low • Construction Low • Services Medium

  32. Real Economy Economic Growth Inflation External Sector Public Sector Risks

  33. Yearly Inflation

  34. Yearly Inflation

  35. Inflation • In favor of a decline: • Decline in International Prices • Domestic Economic Slowdown • In favor of an increase: • Devaluation of the Kwanza • Supply Constraints

  36. Real Economy Economic Growth Inflation External Sector Public Sector Risks

  37. External Sector • Dramatic Decline of Export Revenues • Limited Decline of Imports (Less elastic in the short run) • Current Account Deficit • Sharp Decline in International Reserves • Cash Flow Problems with Balance of Payments • Financing Needs

  38. Net International Reserves (US$ millions)

  39. External Debt / GDP

  40. Real Economy Economic Growth Inflation External Sector Public Sector Risks

  41. Public Sector • Lower Revenues • Drastic Cuts in Spending • How to Finance the Deficit? • High Cost, low demand for government bonds

  42. Exports, Price and Oil Taxes

  43. Real Economy Economic Growth Inflation External Sector Public Sector Risks

  44. Risks • Global Recession • Fiscal and Monetary Policies • Fiscal Policy: • Budget Adjustments • Payment Delays to Suppliers • Financing the Fiscal Deficit (High Cost) • Monetary and Exchange Rate Policies: • Required Reserves • Exchange Rate policy • Social Impacts

  45. Social Impacts • Increase in Poverty • Worsening of Human Development Indicators • Potential increase in hunger • Infant Mortality • Political and Social Stress

  46. Angola’s Economy: Past, Present and Future • Recent Past: High Rates of Growth • Present: The Mother of all Crisis and the Impacts on Angola’s Economy • Future: Medium and Long Runs

  47. Prespectives for the Futuro:Medium Run • At the Global Level: • Bad News: Recession in 2009 and increased unemployment. Price of OIL? • Good News: Some indicators show improvements and that the crisis may have hit bottom, but recovery will be slow • In Angola: • Prepare for the Future • Diversification • Reforms

  48. Growth by Sector

  49. Diversification • Why? • Where is Angola? • How to Diversify? • Challenges: How to surpass them