Over the past year, the Angolan economy has shown signs of slowing down. Gross domestic product (GDP) growth slowed to 3% in 2015 and is on a 1% trajectory in 2016. Annual inflation reached 35.3% in July and keeps accelerating, reflecting the 40%depreciation of the kwanza against the dollar since September 2014, and loose monetary conditions.
In September 2016, the budget was adjusted to account for lower revenue and to sustain growth. Investment spending was increased by 16%, resulting in an increase in the fiscal deficit (6.8% of GDP vs 5.5% initially). The revision had a negative impact on social sector expenditure which were reduced by about 8%. Total public debt – including quasi-fiscal liabilities ‘parked’ in Sonangol, has probably reached 75% of GDP, and debt service has increased to 15% of current expenditure.
Diamond production, the country’s second largest export, grew swiftly until 2006, when production volume reached 9.2 million carats. Since then, production has fluctuated between 8.2 and 9.2 million carats, growing by 4%, reaching 9 million carats. The country has still high potential to expand mining, since only 40% of the Angolan mining resources are known. Diamond exploration is being conducted in 13 provinces and 108 new projects are available for private investors.
Oil exports in the last 10 years accounted on average for 97% of Angolan exports. In 2014 and in 2015, the share of oil in total export remained around the same level. Oil exports brought in $60.2 billion in revenues to the country in 2014. In 2015, foreign currency inflow generated by oil exports was at $33.4 billion, a 44.5% decline in relation to the same period the previous year.
Inflation has accelerated to 31.8% (y-o-y) in June and is currently at its highest level since 2004. It is also the highest in Southern Africa, exceeding by more than 10 points the levels of Malawi, Zambia and Mozambique. This contrasts with an assumption of 11%in the initial 2016 budget.
With lower revenues expected in the face of an 8% increase in public expenditure (led by capital and social expenditures), the fiscal deficit is expected to widen to 6.8%, from 5.5% in the initial budget, the additional deficit to be financed mainly through domestic borrowing. Public debt has reached $48 billion, with $4.4 billion being due within the next 12 months. The reported debt is slightly below the limit of 60% of GDP set by the public debt law. This figure is however conservative since it does not include the debt from Sonangol and payments arrears with suppliers that have not be fully recognized by the Debt Management Office (DMO).
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.
On September 5th, 2016, President dos Santos reshuffled the government.
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.
Development challenges 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 and could benefit from more inclusive development policies.
Last Updated: Oct 17, 2016