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 30 million (2018).
Despite significant progress on macroeconomic stability and structural reforms, Angola is still suffering the effects of lower oil prices and production levels, with an estimated gross domestic product (GDP) contraction around 1.2% in 2018. The oil sector accounts for one-third of GDP and more than 90% of exports. The transformation of a state-led oil economy to a private-sector-led growth model is a complex and long-term process and the oil sector will continue to play an important role during this transition period.
Macroeconomic stability has been restored and maintained through a more flexible exchange rate regime, restrictive monetary policy, and fiscal consolidation. The government has delivered on several key reforms since taking office in 2017, including the new law on Preventing and Combating Money Laundering, as well as the privatization law, the setup of a one-stop window for investors to improve the business climate, and the establishment of a social protection registry to protect the most vulnerable from the reforms. These reforms are already producing some positive results, as Angola tapped the Eurobond market again in the amount of $3.0 billion, and the IMF has approved the second review of the EFF program in December 2019.
The Banco Nacional de Angola (BNA) has maintained a restrictive monetary policy stance to anchor inflation and to offset the impact of the exchange rate devaluation. The BNA continued its efforts to reach a more flexible exchange rate by allowing the oil companies to sell foreign exchange directly to commercial banks, contributing to strengthen buffers against external shocks. Inflation remained high but continued to decline from 18.6% in 2018 to 16.9% in 2019, reflecting weak economic activity and muted exchange rate pass-through.
The authorities are actively addressing financial sector vulnerabilities. The BNA increased minimum capital requirements for banks. An Asset Quality Review (AQR) was conducted with the support of IMF and has indicated that the financial sector is sound.
Angola is expected to remain in recession in 2020 due to the recent plunge in oil prices and the global slowdown resulting from the impact of COVID-19. Oil sector growth will be highly affected due to the combined effect of supply and demand shocks. Non-oil sector growth is also projected to decline due to spillover effects from lower oil prices, reduced imported capital goods, tighter financing conditions, currency depreciation, and restrictions in the movements of goods and people
The COVID-19 pandemic and the global economic disruptions caused by it put at risk Angola’s achievements of macro-economic stabilization and transition to a more sustainable and inclusive growth model.
Angola has maintained political stability since the end of the 27-year civil war in 2002. In 2010, a constitution established a presidential parliamentary system with the president no longer elected by direct popular vote but instead as the head of the party winning the most seats.
While no official statement has been made thus far, the planned local elections scheduled for 2020 are likely to be postponed due to the crises posed by covid-19 and low oil prices.
Internationally, Angola is becoming more assertive and demonstrating a more steadfast commitment to peace and stability in Africa, particularly in the Great Lakes region. Very recently it facilitated an agreement to end mounting tensions between the neighbors Rwanda and Uganda.
Angola has made substantial economic and political progress since the end of the war in 2002. However, the country continues to face massive development challenges, which include reducing its dependency on oil and diversifying the economy; rebuilding its infrastructure; and improving institutional capacity, governance, public financial management systems, human development indicators, and the living conditions of the population.
Large pockets of the population live in poverty without adequate access to basic services, and the country could benefit from more inclusive development policies. According to 2018/2019 Expenditure and Income Survey from national institute of statistics, poverty index was at 40.6%. A social protection scheme program has been launched with a pilot cash transfer project which will benefit over 1.6 million vulnerable families until 2022 across the country.
Last Updated: Jul 01, 2020