Angola

Country Summary

Macroeconomic performance

A sharp decline in oil prices since 2014 has harmed the oil-dependent economy, and real GDP shrank by 0.2% in 2017 and an estimated 0.7% in 2018.

Fiscal revenues declined by more than 50% between 2014 and 2017. Fiscal consolidation through better mobilization of nonoil fiscal revenue and spending cuts reduced the budget deficit to an estimated 2.8% of GDP in 2018 from 4.8% in 2017. Public debt, largely external, increased from 40.7% of GDP in 2014 to an estimated 80.5% in 2018, raising concerns about its sustainability.

The country’s external imbalances created a shortage of foreign currency, which dampened growth in the nonoil sectors. In January 2018, the central bank adopted a more flexible foreign exchange regime that resulted in an overall depreciation rate of more than 40%. Inflation decreased from 31.7% in 2017 to an estimated 21.1% in 2018. As oil prices recovered, the current account deficit stabilized at 0.1% of GDP in both 2017 and 2018.

Poverty incidence fell from 68% in 2000 to 37% in 2018. Poverty is more dominant in rural areas (58%) than in urban areas (19%). Although the country’s Gini coefficient was last estimated at .427 in 2008 by the World Bank, anecdotal evidence suggests that inequality remains high, at around .65. The unemployment rate was an estimated 20% in 2018 and remained high among young people in urban areas (38%).

Tailwinds and headwinds

Angola is projected to emerge from recession with real GDP growth of 1.2% in 2019 and 3.2% in 2020. The recovery will be driven mainly by the production and export of diamonds (growing by 8.2%), agriculture (5%), and construction (2.1%). Changing to a floating exchange regime in 2019 could eventually eliminate the gap between the official and parallel market exchange rates. A 14% value added tax to be introduced in July 2019 will also mobilize domestic resources.

Despite being a Lusophone country sandwiched between Anglophone and Francophone countries, Angola plays a vital role in Southern Africa. It is a member of the Community of Portuguese Language Countries and the Southern African Development Community and is a signatory to the African Continental Free Trade Agreement. In efforts to open Angola’s borders, a 2018 law allows for exemption and facilitated tourist visa processing.

To attract foreign investment, a new private investment law approved in June 2018 reduces the minimum capital requirement, facilitates repatriating capital, and eliminates a requirement that local investors have a 35% stake. But the law does not cover specific sectors regulated by other laws, such as mining, oil and gas, and financial services. The country is also working to improve market regulation by addressing governance issues, enacting a competition law in May 2018, and improving the efficiency of stateowned enterprises through privatization.

High dependence on oil remains the key risk to Angola’s outlook. Oil production fell by 9% in the first half of 2018 compared with 2017 due to declining investments, mostly in offshore fields. Angola’s oil revenues may also suffer from US–China trade tensions if stringent tariffs slow China’s economic growth and thus hamper its demand for crude oil.

Angola’s economic outlook is also linked to implementing two medium-term plans: the Macroeconomic Stability Program addressing macroeconomic imbalances and the National Development Plan fostering stronger governance, sustainable and inclusive growth, and competitiveness in the nonoil sector.

Source: African Economic Outlook 2019

Fixed Income

Sovereign Rating as at October 2017

Issuer Score  
S&P B- Stable
Moody's B2 Stable
Fitch B Negative

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