Economic Overview

Over the past year, the Angolan economy has shown signs of slowing down; real gross domestic product (GDP) grew by 4.2% in 2014, down from 6.8% in 2013. This is primarily due to the weak performance of the oil sector, which has contracted since 2011. Oil production declined by 2.6% in 2014 due to unscheduled maintenance and repair work in some oil fields, compared to a decline of about 1% in 2013. Growth in the non-oil economy also slowed in 2014 on account of delays in the execution of key electricity and industrial investments. Non-oil growth is nevertheless estimated to have reached 7.3% as a result of the recovery of the agriculture sector following the 2012 drought as well as expansion of the service sector.

The decline in international crude oil price has had a substantial impact on budget balances, with the fiscal deficit widening from 0.3% of GDP in 2013 to 2.9% in 2014. With a continuous decrease in global crude oil prices the country’s budget has witnessed a significant decline in oil revenues, from 30-24% of GDP between 2013 and 2014. By contrast, non-oil revenues slightly increased over the same period, from 8.1 to 9.1% of GDP between 2013 and 2014, thereby containing the decrease in total revenues to 14%. Alongside lower revenues, a contraction in public expenditure was also registered. Public expenditure as a percent of GDP fell by 3.2% of GDP in 2014, driven by lower current expenditure, specifically expenditure on goods and services and subsidies. Capital expenditure also fell by 0.6% of GDP in 2014 due to liquidity pressures arising from the decline in oil price. With expenditures contracting by 8%, the fiscal deficit widened from 0.3% of GDP in 2013 to 2.9% in 2014.

The current account surplus has narrowed, reflecting reduced oil-related export earnings and higher imports. Lower oil prices and a contraction in oil production, combined with structural deficits in the services balance and negative net income, have eroded the current account surplus. Oil exports began to decline in 2013 as domestic production fell. Combined with a slight increase in imports, the trade balance fell from 41.1% of GDP in 2012 to 24.3% of GDP in 2014 and led to a current account deficit of  0.9% of GDP — the first deficit since 2009. Net international reserves are projected to have reached $27.5 billion, representing nine months of imports, by the end of 2014.

Owing to declining global food prices, increased agriculture production, and the efforts of the Angolan central bank to stabilize the nominal exchange rate, inflation in 2014 reached the historically low level of 7.3%, down from 8.8% in 2013. Inflation is expected to remain below double digits in 2015.

Political Context

Angola has maintained political stability since the end of the civil war in 2002. In February 2010, the Constitution established a presidential parliamentary system. Under the new system, the president is no longer elected by direct popular vote, but instead the head of the party winning the most seats in Parliament becomes President. The 2010 Constitution sets a limit of two, five-year presidential terms.

Parliamentary elections were held under the new Constitution in August 2012. The ruling party Movimento Popular de Libertação de Angola (MPLA) won 175 out of 220 seats in 2012, receiving over 72% of the votes. As a result, the incumbent Jose Eduardo dos Santos was sworn in as President. União Nacional para a Independência Total de Angola (UNITA) is the main opposition party with 32 parliamentary seats, while Convergência Ampla de Salvação de Angola (CASA-CE) established  six months before the elections, and Partido de Renovação Social (PRS) won eight and three seats respectively.

The next legislative elections are scheduled to take place in 2017. At the polls, the MPLA is likely to take advantage of its solid funding base, strong business connections and domination of the media to win another majority and retain its hegemonic grip on all aspects of power. Should President Jose dos Santos decide to relinquish power before the poll, the constitution dictates that the vice president (currently Manuel Vicente) would complete the term of office "with full powers." This term of office would run until the next election, which only the acting head of state would have the power to call.

Opposition groups had hoped that they would be able to build political momentum at long-delayed municipal elections, scheduled for 2015. However, this has been derailed following the announcement that the polls are unlikely to be held before 2018 at the earliest. Opposition parties accuse the MPLA of deliberately delaying local elections to protect its power base, and have also expressed concern about the government's planned alterations to the current electoral law to facilitate a new voter-registration process ahead of the 2017 legislative elections. The authorities argue that new registration is necessary to ensure that they have the correct details about all voters, but while cleaning up the electoral databases is a positive move, opposition groupings believe that the method of doing so will compromise the independence of the national electoral commission, the Comissão Nacional Eleitoral. This suggests that opposition groups will again regard the electoral process as in effect invalid if, as seems likely, they fail to mount a coherent and sustained electoral challenge to the ruling party.

Internationally, Angola is becoming more assertive and has been demonstrating steadfast commitment to peace and stability in Africa, in particular in the Great Lakes region. After Angola took over the presidency of the International Conference of the Great Lakes Region in January 2014, the situation in the region has improved significantly, most likely a result of Angola’s leadership. In this role, Angola was able to secure a commitment from the states of the region to economic and political sanctions against armed rebel groups for the first time.

Development Challenges

Angola has made substantial progress in economic and political terms since the end of the war. However, the country continues to face massive developmental challenges which include reducing the dependency on oil and diversifying the economy, rebuilding its infrastructure, improving institutional capacity, governance, public financial management systems, human development indicators and the living conditions of the population. Large pockets of the population still remain in poverty and without adequate access to basic services. With Angola’s high population growth rate and existing income, and service access disparity across different regions, which could benefit from more inclusive development policies.

With oil prices continuing to fall, the government passed a revised, austerity 2015 budget in late February and approved by the National Assembly in March 19th. This is based on a benchmark oil price of $40/barrel instead of the $81/b included in the original 2015 measure, and outlines a series of steps designed to reduce expenditure in the low oil price environment. This is consistent with previous warnings by the administration that the fall in oil prices will necessitate an "exercise in austerity" and a re-prioritization of public expenditure. In pursuit of this, the government has twice reduced fuel subsidies—and further cuts in subsidies are planned—and introduced a freeze on public sector hiring until the end of 2015. At the same time, however, it is likely to remain wary of implementing policies that could lead to sustained public unrest, and it has thus pledged that social programs such as health and education will be protected.

There is a risk that introducing kneejerk austerity measures—especially in the area of capital spending—could create longer term problems for the economy and slow down much-needed attempts at diversification. For the time being, therefore, the government remains overtly committed to an ambitious policy agenda designed to promote more stable and inclusive growth and formal job creation, as well as important social and infrastructure programs. However, Angola may resort to International Monetary Fund (IMF) support if oil prices fall substantially and for a prolonged period.

Last Updated: Apr 13, 2015

World Bank Group (WBG) in Angola

The WBG activities in Angola are undertaken within the context of the recently approved Country Partnership Strategy (CPS) 2014-2016.  The CPS takes as its overarching strategy the promotion of more inclusive development, with two core objectives constituting pillars, and one foundation plank of cross-cutting nature as follows:

  • Pillar I focuses on supporting integrated national economic diversification by revitalizing rural economies toward greater competitiveness and employment. The focus will be on the strengthening of the non-oil economy, with emphasis on recuperating traditional lines of business that suffered greatly during the war, as well as the technical assistance for the energy sector.
  • Pillar II will focus on enhancing the quality of service delivery to improve the quality of life of the population and equip them to take a greater role in the development of the country and instituting a strong social protection program.
  • The Foundation Plank of the CPS will revolve around building human and institutional capacity approaching the levels common in the middle-income countries, complementing the two strategic Pillars.

These objectives will be achieved during the CPS period through stronger attention to quality and implementation of five existing IDA projects as well as through new IBRD lending, and the expected build-up of a series of Reimbursable Advisory Services (RAS).

The current World Bank portfolio is comprised of five International Development Association (IDA) funded investment projects with a total net commitment of $426 million dollars. These include:

  • Learning for All Project (USD $75 million);
  • Municipal Health Services Strengthening Project (USD $70.8 million) which benefits from a co-financing by Total E&P Angola in the amount of USD $4.5 million;
  • Local Development Project (LDP), USD $81.7 million implemented by the Fundo de Apoio Social);
  • Water Sector Institutional Development Project (USD $177 million – USD $57 million and USD $177 million AF)
  • Market Oriented Smallholder Agriculture Project (USD $30 million)

The country was declared creditworthy in 2010 with an IBRD exposure ceiling of US$900 million. A budget support operation is in pipeline to help the Government address the fiscal gap resulting from the decrease in the oil prices, and discussions are also underway to firm a lending pipeline in the water and agriculture sectors. A new phase of a social protection and local development project are also in the pipeline in the social protection sector, more precisely to continue to help strengthen local administration and to support vulnerable communities across the country. 

Last Updated: Apr 13, 2015

Improved service delivery to the poor – Governance was one of the key pillars of the World Bank Group’s (WBG) Interim Strategy Note (ISN) that ended in June 2009 and will continue to be emphasized in the current Country Partnership Strategy (CPS) approved in September 2013 by the Board. The Angolan government continues to recognize the importance of the involvement of community members and local organizations in the country’s development and has formulated policies and programs to encourage such approach to development. The process towards decentralization gained momentum in Angola between 2007 and 2008, when the government of Angola advanced in terms of strategy, policy and legal framework through the adoption of key instruments with the intention of building the foundation for creating devolved, elected local governments.

The Angola Social Action Fund, commonly known as “Fundo de Apoio Social (FAS)” has been the main WBG support program which contributes toward decentralization. The project, which has improved poor communities’ access to basic social and economic infrastructure and provision of services, has been in implementation in various phases since 1994. The project, now called the Local Development Project (PDL) is in its fourth phase, and has been considered as the largest bottom-up poverty reduction program in Angola. It provides direct financial support and capacity development assistance to poor communities complementing government’s efforts in the construction and rehabilitation and decentralization processes.

During the third phase of the project, 1,575 pieces of community infrastructure were constructed and rehabilitated in all 18 provinces of the country enabling about 2.3 million Angolans to gain access to basic social and economic services. Mechanisms and practices for participatory governance systems have been established, in which local governments are increasingly more accountable to their constituencies and about 7,200 individuals benefited from its capacity development activities, half of whom (3,108) received formal training. The fourth phase of the project, which began implementation in August 2011, consists of interlocking and complementary components:

  • The first component aims to increase access to improve social and economic infrastructures for poor households by financing the rehabilitation and construction of basic public works and the acquisition of essential goods in response to local development plans and through municipal grants.
  • The second component aims to improve business development skills and participation in markets of selected producer groups by providing a combination of technical assistance to selected municipalities to prepare their municipal economic development strategies, technical assistance to participating provinces to conduct sector and value chain studies, technical assistance and training for FAS to prepare and implement the matching grants manual, provide matching grants to selected producer groups and business development service providers, technical assistance and training to producer groups and business development service providers on business skills, managements, and marketing and organization of workshops on microfinance.
  • The third component aims to strengthen the capacities of public entities and civil society to be inducted in the participatory planning, management, and monitoring of basic public service delivery and expenditure management.

Social inclusion and poverty reduction – The WBG supported the demobilization and reintegration program of the Angolan government through the Multi-Donor Reintegration Program (MDRP) in 2002, when the country had just ended the long civil war. This was a fundamental exercise for the country to achieve its political stability after the peace agreement was signed. The MDRP was a multi-agency effort that contributed to the demobilization and reintegration of ex-combatants in the greater Great Lakes region of Central Africa.

Strengthening public sector management – To support government’s efforts to improve macroeconomic stability, the WBG financed the Economic Management and Technical Assistance (EMTA) project. The main objective of the project was to strengthen the government's capacity to formulate sound analysis and to implement sound policies in areas which were critical to the design and implementation of its poverty reduction strategy, as well as the medium-term planning including the establishment of a more transparent and efficient public finance framework. Major results included the modernization of payment systems, such as the Real Time Gross Settlement (RTGS) availability which is now above 99% with continued increase in number of transactions and amounts. Increased retail services as the number of cards, Automated Teller Machines (ATMs) and Point of Sales (POS) grew: 685,000 cards; 486 ATMs, 850 POS. The RTGS system is facilitating a large value inter-bank payment and settlement in real time online mode on a transaction by transaction basis.

Another major result is the Household Expenditure Survey, also known as Inquérito do Bem Estar da População (IBEP) co-financed by the Bank and UNICEF, conducted in 2008 and 2009 across all 18 provinces and whose results were recently published by the Ministry of Planning. The survey indicates, amongst other, that approximately 37% of the population lives below the poverty line, with 58.3% in rural areas and 18.7% in urban areas.

Last Updated: Apr 13, 2015

The WBG continues to leverage its support by working closely with other key stakeholders. Such entails closer collaboration with other Development partners, the private sector, civil society organizations (CSOs), academia and think tanks. Some of the institution’s traditional partners include UN agencies (UNDP, UNICEF), European Commission, USAID as well as the oil sector companies on innovative cooperation opportunities.

Last Updated: Apr 13, 2015


Angola: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments