Angola: Disinflation Time

Lucky Minister. Angola's current Finance Minister, Archer Mangueira might be forgiven for thinking he has the magic touch. He has only been in office since last September, when the former incumbent, Armando Manuel, was summarily dismissed amidst rising inflation and tumbling growth. In any case, Mr Mangueira has already presided over the headline rate of inflation falling to its lowest level for nearly a year. At the same time, oil output and business sentiment, which tend to lead overall activity, have shown signs of picking up. Aggregate output should get a further boost during the year from extra, largely Chinese-financed, government spending in the run-up to the Presidential election.

Central bank and exchange rate on hold. June 1 saw the National Bank of Angola announce that the key policy rate was being held at 16.0% where it has been since June last year. Although the headline rate of inflation remains well above the 2017 target of 15.8%, its current downtrend means that the central bank is likely to keep the policy rate on hold, at least until Q3 when it will have clearer steer on 2017 activity. Meanwhile, in the absence of a sharp fall in oil prices, the Angolan Kwanza, which has been held at stable at around 165 per USD for more than a year, is also likely to remain unchanged.