Population 20.213 million
GDP 114.833 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
3.4 |
3.9 |
7 |
8.5 |
|
Inflation (yearly average) (%)
|
14.5 |
13.5 |
10.8 |
8.6 |
|
Budget balance (% GDP)
|
5.5 |
10.2 |
7 |
5.3 |
|
Current account balance (% GDP)
|
9 |
10 |
8.5 |
6.6 |
|
Public debt (% GDP)
|
37.6 |
31.5 |
28 |
29.2 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Large and growing oil production
- Starting to produce liquefied natural gas
- Considerable economic potential: diamonds, copper, iron, gold, agriculture, hydraulic resources
- Strong regional influence, both financial and military
- International backing
WEAKNESSES
- Vulnerability to oil price reversals
- Instability of the Cabinda enclave, source of one third of the oil
- High social inequalities and regional disparities
- Dilapidated infrastructures
- Political and economic control exercised by a tightly-knit elite
- Vulnerability of Angolan banks to eurozone situation
- Scale of informal economy
Risk assessment
Growth buoyed by start-up of liquefied natural gas production
In 2012, higher oil production (average of 1.77mn barrels/day compared with 1.66mn barrels/day in 2011) ensured strong growth despite disappointing harvests (agriculture: 10% of GDP) due to drought. In 2013, the country is expected to benefit the positive impact of the start-up of liquefied natural gas production (LNG), initially planned for June 2012. Consequently, trade’s contribution to growth is likely to increase significantly. In contrast, the increase in local oil production is unlikely to offset the expected, admittedly moderate, fall in the oil price. Non-oil growth is likely to be driven by construction, boosted by public investment in major energy (wind farm in Namibe province) and port (start-up of works at deep-water port project in the Caio locality in Cabinda province) infrastructure projects. This drive to diversify the economy will be strengthened by the launch of a new sovereign investment fund (FSDEA with $5bn USD) to finance infrastructure projects (water, electricity) and hotels to encourage tourism. Other sectors are also vigorous, like diamond production and services (telecommunications, financial intermediation). Inflation is expected to slow due to lower imported food prices (about 40% of staples) and consumption, which will remain modest.
Current account and fiscal surpluses which remain dependent on oil income
The trade surplus is expected to firm up in 2013, carried by exports of NLG and oil (98% of expors). At the same time, food imports will remain steady. The current account surplus is likely to narrow slightly due to the growth in imports of goods and services for the exploitation of hydrocarbons and dividend repatriation by foreign companies. In this context, the Central Bank can set aside comfortable foreign exchange reserves (over 7 months of imports) allowing it to contain pressure on the exchange rate.
The fiscal surplus in 2012 was ensured by a rise in the production of crude and higher prices, as most public revenue derives from oil income. In 2013, fiscal revenues will not be as high due to a more modest price per barrel, while social spending (programme to combat poverty) and public investment will continue to climb. In the medium term, fiscal reform is planned to improve the management of oil income, involving, among other things, the implementation of a medium-term scenario (2013-2017) with technical assistance from the IMF.
Meanwhile, Angola’s banking sector is still vulnerable to the economic and financial situation in the eurozone, as several banks are owned by European (in particular, Portuguese) banks.
Social tensions and shortcomings in the business environment
The August 2012 elections resulted in another victory for President José Eduardo Dos Santos (of the MPLA) with 72% of votes cast (compared with 82% in the preceding 2008 elections), giving him another 5-year term after 33 years in office. Recent promises on social spending are a sign of his attempts to deal with the social demands (especially for housing) which were a mark of the electoral campaign. Housing prices, especially in the capital, Luanda, are very high, in a country characterised by great social inequalities. Social tensions could worsen if the government fails to improve the situation. However, the government’s grip on the media and press, and the population’s wish for stability after a 27-year long civil war (which ended in 2002) is likely to curb more widespread and organised unrest. Added to these tensions are those appearing within the ruling elite over the succession President Dos Santos (70-year old). Finally, the business climate remains marked by a lack of transparency, persistent legal instability and a high degree of corruption, which places the country 168th out of 182 on Transparency International’s Corruption Perceptions Index.
