A vast country with a long coastline and central plateau, Angola thrusts inland across Southern Africa to border Namibia, Botswana, Zambia, and the Democratic Republic of the Congo. Its principal cities, including its capital, Luanda, look west over the South Atlantic to Brazil, another Portuguese-speaking nation (like itself). It has a population of more than 33.08 million (2022).
Economic Overview
Angola’s economic fortunes have been tied to global oil demand, which brought volatile growth and left the country with high levels of poverty and inequality. Reforms over the past five years have improved macroeconomic management and public sector governance. Macroeconomic stability has been enhanced through a more flexible exchange rate regime, central bank autonomy, sound monetary policy, and fiscal consolidation. Laws have been introduced to allow greater private sector participation in the economy, increasing the stability of the financial sector and reducing the impact of oil revenue volatility on public finances.
High poverty is linked to a lack of good-quality jobs: 80% of jobs are informal and half are in the primary sector (often subsistence work). Urban and youth unemployment remain high, exceeding 38% and 50%, respectively. Economic diversification remains elusive while oil production is declining and global decarbonization looms in the medium-term. Angola needs to urgently invest in removing barriers to private sector investment to achieve economic diversification to support growth, job creation, and poverty reduction.
Given the jobs challenge, high poverty, and a rapidly growing population, investing in human capital and poverty reduction is a top priority. Inadequate provision of health and education reduce the potential productivity of a child born in Angola to 36% of what it could be. Recent investments in education and health have been complemented with the roll-out of a social registry and the Kwenda cash transfer program in 2020, with close to a million rural households registered. A broader social safety net with adaptable income support could substantially reduce extreme poverty, mitigate the impact of shocks on households, and support investments in human capital. Investments in human capital will require sustainably increasing spending and improving management and accountability to ensure results.
Growth accelerated in 2022 to an estimated 3.5% (from 1.1% in 2021)−the first time since 2014 that it outpaced population growth−thanks to a small rebound in oil production and high oil revenues. Higher oil prices allowed for fiscal expansion, especially in public investments, and appreciation of the domestic currency, underpinning strengthening domestic demand and generating growth in private consumption estimated at around 5%. The oil sector contributed to this recovery with a growth of 1.4%, the first expansion since 2015. Non-oil output accelerated with agriculture and fisheries growing almost 7% and the services sector recovering to pre-COVID-19 levels. Construction activity expanded, benefitting from higher government investment in the context of improved financial conditions and an election year.
With higher oil prices, the currency appreciated by 26.2% in 2022, though appreciation pressures have receded since late 2022. The current account surplus stood at about 11% of GDP, driven by high growth in oil exports (51% year-on-year). International reserves stood at $14.5 billion dollars at the end of 2022, or about 6 months of imports.
Inflation has fallen rapidly, allowing the Central Bank to moderately loosen monetary policy. The year-over-year rate fell from 27% in December 2021 to 13.9% in December 2022, the lowest rate since 2015. As inflation pressures subside, the Central Bank lowered the reference rate from 20% until September 2022 to 18% by January 2023.
Due to decreased oil production and reduced fiscal impulse, growth is expected to moderate to 2.6% in 2023, falling once again below population growth (3.1%). Growth in the non-oil economy, especially in agriculture, construction and services is expected to remain robust, with non-oil GDP growth exceeding 4% annually. While the poverty rate is expected to continue marginally decreasing, due to rapid population growth, the number of poor will surpass 11.7 million.
Transforming the state-led and oil-funded economic model into a sustainable, inclusive, private-sector-led growth model requires high-level political commitment, strong coordination and communication capacity, and solid institutions. While much remains to be done to achieve this transformation, reforms over the past five years have improved macroeconomic management and public sector governance. Macroeconomic stability has been enhanced through a more flexible exchange rate regime, central bank autonomy, sound monetary policy, and fiscal consolidation. Laws to allow greater private sector participation in the economy, increase the stability of the financial sector, and reduce the impact of oil revenue volatility on public finances have also been introduced.
Political Context
Angola's fourth post-war elections were held on August 24, 2022 and the ruling MPLA (Popular Movement for the Liberation of Angola) party won with 51% of the vote. UNITA (Union for the Total Independence of Angola), the main opposition party, secured 44% of the votes, its best results ever. The results confirmed a second and final term for President João Lourenço.
Overall, the opposition won 96 seats, up from 70 in the 2017 elections. The new government comprises 23 ministers and 3 ministers of State.
Internationally, Angola is continuing to be assertive and demonstrating a steadfast commitment to peace and stability in Africa, particularly in the Democratic Republic of Congo where it has led regional efforts to end the instability which threatens the entire Great Lake Region.
Last Updated: Apr 04, 2023
