Country Summary

Economic performance and outlook: As a result of lower international oil prices, real GDP growth was 4.7% in 2011–15, down from 12.6% in 2006– 10. Lower oil prices hurt fiscal revenues, leading authorities to cut infrastructure expenditures 55% between 2014 and 2017. The decline in foreign currency supply and resulting local currency depreciation hampered economic activity and job creation in import-dependent industries, such as construction, manufacturing, and retail services. Economic growth slowed to 0.1% in 2016 but recovered to growth (an estimated 2.1%) in 2017, due to strong performance in agriculture, fisheries, and energy. The economic prospects for beyond are subdued, with growth projected to remain modest, at 2.4% in 2018 and 2.8% in 2019. 

Macroeconomic evolution: Government revenues declined 51% between 2014 and 2017, to $22.3 billion. Oil-related revenues accounted for 46% of total receipts in 2017, down from 67% in 2014. Total expenditure fell 44.8% between 2014 and 2017, to $29.3 billion, which was insufficient to prevent a budget deficit of 5.7% of GDP. Current expenditures dominate government spending: compensations to employees are $9.8 billion, and goods and services amount to $6.3 billion. More funds were allocated to social sectors (38%), reflecting the government’s commitment to protect the most vulnerable groups and reduce the 37% poverty rate. Monetary policy was tightened to contain inflationary pressures arising from a weakening exchange rate, which was devalued 40% between September 2014 and April 2016. Public debt increased from 65.4% of GDP in 2015 to 71.5% in 2016, reflecting higher government borrowing in the domestic market to finance budget deficits in an environment of high domestic yields and weak oil revenues. 

Tailwinds: Angola made significant strides in reducing the poverty rate from 54% in 2000 to the current 37%, but the economic slowdown driven by weaker oil prices requires structural reforms to support diversification. The government is allocating nearly $5.5 billion to finance private sector projects in areas with high import-substitution and export-promotion potential—in particular, food production, fishery and agro-industry, oil and gas, mining, tourism, transport, and logistics. New electricity projects, approved prior to the oil shock—notably, the 960 MW Cambambe hydropower station, the 480 MW combined-cycle gas power station in Soyo, and the 2,070 MW Laúca hydropower station—will increase electricity supply. In transport, 2,725 km of railway network and 13,000 km of roads— including regional corridors connecting to the Democratic Republic of Congo, Namibia, and Zambia—have been rehabilitated. Construction of a new international airport in Luanda is ongoing, and a new commercial port north of Luanda with 44 logistical platforms to connect to railway lines and trunk roads nationwide has been planned. 

Headwinds: The economic base remains narrow; oil accounts for more than 95% of export revenue, 46% of government revenue, and 30% of GDP. The slowdown in economic growth, below the average annual population growth of 2.7%, reduced income per capita to $3,514 in 2016, the lowest in a decade. Net international reserves declined from $20.8 billion (equivalent to 7 months of imports) in 2016 to $15.6 billion (about 6 months of imports) in October 2017, due to lower oil exports. Despite the country’s economic potential, persistent structural challenges hinder economic diversification and inclusive growth, notably weak institutions, weak agricultural productivity, inadequate infrastructure, limited qualified human resources (in particular, in business management, science and technology, construction, and manufacturing), and weak trade facilitation and export support systems. Despite recent improvements, the business environment remains onerous, impeding private investment, as highlighted by the country’s ranking of 175 out of 190 countries in the World Bank’s 2018 Doing Business report.

Source: African Economic Outlook 2018

Fixed Income

Sovereign Rating as at October 2017