Angola economy seen growing by 8.5 percent in 2010

By Vuyani Ndaba

JOHANNESBURG (Reuters) - Angola's economy should grow by 8.5 percent this year, boosted by higher oil production and a pick-up in agriculture and diamond mining, a Reuters survey showed on Thursday.

However, nine economists polled by Reuters said inflation in what has been one of the world's fastest growing economies would average 13.3 percent this year, and 11.8 percent next year.

"The economy is set to rebound in 2010 on a rising oil price, new oil production capacity, strong agricultural growth and a pick up in diamond mining, resulting in a strengthening of the external position," said Janine Botha of NKC Independent Economists.

The forecasts, which are in line with World Bank estimates, come after the number two African oil producer narrowly avoided official recession in 2009 with expansion of just 1.3 percent.

One of the economy's main problems will remain double-digit inflation.

"Despite a weaker exchange rate, inflation has been relatively stable. Inflation is likely to remain at a high level due to logistical issues," said Victor Lopez, Sub-Saharan economist at Standard Chartered.

Once a major food exporter, Angola now imports almost all its food. Rising food prices helped lift annual inflation to 13.85 percent in May from 13.73 percent the previous month.

The poll saw the budget deficit narrowing to 3.5 percent of GDP this year, from an International Monetary Fund (IMF) estimate of 9.1 percent of GDP in 2009, when low oil prices blew a hole in the country's finances.