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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)4.83.0-0.71.51.6
GDP (USD bn)126.8103.095.3124.0138.2
Inflation (average)7.310.332.430.420.6
Fiscal Balance (% GDP)-6.6-3.3-5.0-6.8-5.5
Broad Money (% change, end period)16.211.814.116.619.4
Population (mn)25.7926.5627.3628.1829.03
Exports (USD bn)60.934.428.635.936.8
Imports (USD bn)53.538.028.133.534.8
Current Account Balance (% GDP)-3.0-10.0-5.1-5.2-4.5
FX Reserves (USD bn, end period)39.133.020.517.215.2
Exchange Rate (average)98.42120.31165.86167.16175.08
Oil production (mn bpd)1.7991.7121.8261.8511.87
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic Outlook

Economic Outlook

Real GDP: After contracting in 2016, real GDP moved into positive territory in 2017 and we expect this trend to continue in 2018 amid higher oil production and the new government’s efforts to diversify the economy away from oil and better manage oil revenues. Economic activity will be supported mainly by strong public spending, although this has been curtailed somewhat, in light of the recent reduction in fiscal and export revenues, which has undermined FX liquidity, and prospects for production in the non-oil sector, specifically, construction, industrial and services. The government has embarked on a fiscal consolidation programme, removing fuel subsidies, reducing the wage bill and phasing out utility tariffs while broadening the tax base; the latter includes plans to introduce VAT from January 2019 and strengthen tax collection administration. However, government spending on infrastructure, particularly in the power sector and road building (assuming capital spending is not cut significantly), will boost the non-oil sector. Non-oil growth will also be supported by ongoing, albeit moderate, improvements to the business environment and financial sector reform. Oil GDP will be supported by further increases in oil production although the indirect effect of sustained low oil prices will continue to weigh on the sector.

Inflation: The disinflationary trend seen in the economy in most of 2017 (from a peak of 29.7% y/y in January to 23.7% y/y in December), is likely to reverse in 2018 as recent devaluation of the official exchange rate trigger a fresh round of inflationary pressures; this is given Angola’s high import-dependent nature. Furthermore, with oil revenue expected to remain below pre-crisis trend, positive spillover effects into the non-oil sector will be weak, undermining the production of goods and services in the non-oil sector. This will sustain upward pressure on production inputs. As such, inflationary pressures will rise, prompting the monetary authorities to resume hikes in the key policy rate (from 18% to possibly 24-25% by the end of 2018), given the need to contain the impact on inflation following the devaluation, while improving liquidity management.

Fiscal balance: Alongside a recovery in crude oil prices, we expect the weaker exchange rate to translate to improved fiscal revenues, helping to drive a softer budget deficit over 2018. Ongoing spending adjustments and growing efforts to mobilise additional non-oil taxes, given the shift required to reduce dependency on the oil sector, will also reduce fiscal pressures. However, the budget deficit will remain large. Amid this, the authorities will need to continue to take strong policy steps to mitigate the impact of the oil price shock in 2014-15 by making further spending cuts and accelerating non-oil sector reforms.

Current account: Despite ongoing fiscal spending adjustments, strong demand for imports will push up the import bill over 2018, but higher crude oil prices, alongside the weaker exchange rate will drive exports and compensate for the negative impact; this in turn will help to drive a softer deficit on the current account during the year. We expect the current account deficit to shrink to 4.5% of GDP from an estimated 5.2% of GDP in 2017.

The authorities will continue to face several challenges in 2018, which they will have some success in meeting: to make investment spending more efficient, enhance public financial management by improving management of oil revenues and cash management, increase FX reserves, and reduce inflation.

 

Risks

There remains a strong need to boost economic diversification by improving the business environment and competitiveness, and by strengthening the role of the private sector across the economy. On the policy front, there remains a strong requirement to adopt an improved medium-term fiscal framework and a properly designed fiscal stabilisation fund to reduce pro-cyclical spending and an increase in debt – both of which pose major risks to economic stability.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange Rate Structure

RegimeOther managed arrangement
TargetNo official target but allowed to float within bands
Type of interventionVia Central Bank
Convertible currency?No
Market participantsn/a
Source: Bloomberg, IMF, and Ecobank Research

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange rate structure

RegimeOther managed arrangement
TargetNo official target but allowed to float within bands
Type of interventionVia Central Bank
Convertible currency?No
Market participantsn/a
Source: Bloomberg, IMF, and Ecobank Research

FX

FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesNoNoNoNo
Daily trading volume (USD mn)n/an/a
Average trade size (USD mn)n/a
Average spreadn/a
Trading hoursLimited
Settlement cycleT+2
FX Market StructureThe central bank is the largest provider of FX in Angola. FX is auctioned to banks that bid for FX quantities according to a predefined auction calendar.
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowLimits to unrequited transfers to non-residents; discriminatory application of the 0.015% stamp tax on FX operations.n/a
Financial flow
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowLinmits on availability of FX for invisible transactions; limits to unrequited transfers to non-residents; discriminatory application of the 0.015% stamp tax on FX operations.n/a
Financial flow
Source: Bloomberg, IMF, and Ecobank Research

FI

Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
IssuerGovernmentn/aGovernmentn/a
End useGovernment financingGovernment & infrastructure financing
Maturity structure28- to 182-days1- to 12-yrs
CouponZeroFixed / Floating
Coupon paymentsn/aSemi-annual
Secondary Market
Daily trading volumeLimited tradingn/a
Average trade sizeLimited trading
Settlement cyclen/a
Ecobank local affiliate contact details:
Ecobank Angola Representative Office, Rue Joaquim Kapango No 31, Ingombota-Luanda
Tel: +244 938 910 345
Source: Bloomberg, IMF, and Ecobank Research

FI primary market information

FI primary market information

Angola Debt2014201520162017e2018f
Government debt (% GDP)40.765.475.865.166.0
Sub-Sahara average44.552.656.155.655.8
External debt (official creditors, % GDP)27.435.844.735.432.8
Sub-Sahara average25.530.231.932.933.2
External public debt stock (USD bn)34.736.942.644.045.4
Share of total sub-Sahara debt (%)13.914.114.513.212.7
Source: IMF and World Bank

Commodity and trade information

Commodity and trade information

Hydrocarbon & mineral production

Angola is Sub-Sahara Africa’s second largest crude oil producer (after Nigeria), with output of 1.85mn bpd in 2017, most of which was exported to China (53%), the USA (12%) and India (10%). Angola produces almost 98% of its crude oil from offshore fields. Angola has an estimated 17bn barrels of oil offshore reserves, including pre-salt discoveries estimated at over 4bn barrels. The country also has estimated gas reserves of 11 trillion cubic feet, most of which are located offshore.

Angola’s first LNG plant is a joint venture between Angola’s Sonangol and several international oil companies (Total, BP, Chevron and ENI), with a nameplate capacity of 5.2mn metric tonnes per annum. The plant was brought on stream in July 2013 and shipped a dozen cargoes before it was forced to close owing to technical challenges. The plant resumed production in 2016, boosting LNG exports by 7.4% that year, to 26mn tonnes.

Domestic consumption of petroleum products is around 93,000 bpd. This is well in excess of the capacity of the country’s sole refinery, FinaPetroleo de Angola, which produces around 39,000 bpd, making the country dependent on imports to meet the shortfall. Pump prices are subsidised to reduce the impact of high oil prices and weak exchange rates, with the government spending more than USD3.7bn on fuel subsidies in 2015. However, the subsidy was reduced following the slump in oil revenues and the weakening exchange rate.

Angola is the world’s sixth largest diamond producer, with output of 9mn carats in 2016, including both alluvial and mine production. The country’s diamond production is expected to surge in the coming years, thanks to rising investment in new mines (notably the exploration concession granted to De Beers). Angola has large reserves of iron ore, notably in Huíla province where the Cassinga mine produced 1.1mn tonnes per year during the 1980s. However, efforts to restart production have foundered owing to the lack of logistical infrastructure and extremely weak international prices. Industrial mining of gold in Mpopo (Huíla province) was due to start in 2018, albeit on a small scale, and there are plans to produce 50,000 tonnes/year of phosphate in the Tomboco region where there are estimated reserves of 215mn tonnes. In 2016 the country also produced 125,000 tonnes of granite for export to international markets and 50,000 tonnes of salt. Angola is known to have rich reserves of copper, manganese, uranium, coltan and marble, but to date there has been little exploitation of these.

Soft commodity production

Angola’s agriculture sector largely collapsed during the country’s length civil war and has struggled to re-establish itself since peace returned in 2002. Agricultural production is focused on staple foods for domestic consumption, including 10mn tonnes of cassava, 3.9mn tonnes of bananas, 1.8mn tonnes of sweet potatoes and 1.5mn tonnes of maize in 2017. However, output falls short of demand (notably from the rapidly urbanising population), and as a result Angola is dependent on imports of many basic foodstuffs (even eggs and flour).

In recent years the Angolan government has made efforts to revive commercial cash crop production in a bid to diversify the economy away from hydrocarbons. However, these efforts have been undermined by high operating costs, the lack of cheap and reliable power supplies, poor logistics for getting perishable goods to market, and the strength of established food importers. The one exception is sugar, led by the integrated Biocom sugar project in Malange province. This has forecast production of 63,000 tonnes of sugar in 2018 and aims to increase output to 250,000 tonnes by 2021, along with production of ethanol and bio-generated electricity.

Trade flows

Imports

Angola is one of Middle Africa’s most heavily import-dependent countries, with total imports of US$10.8bn in 2017. Angola is dependent on the import of capital goods, reflecting the underdevelopment of its manufacturing sector. The country imported machinery, vehicles, locomotives & aircraft together worth US$2.5bn in 2017. The country is also dependent on imports of consumer goods, including US$1bn of electronics, US$398mn of footwear & apparel, US$245mn of furniture & US$170mn of pharmaceuticals in 2017. The country is also reliant on imports of industrial raw materials, including US$634mn of iron & steel and US$426mn of plastics in 2017. Given the country’s large food deficit, Angola imports large volumes of foodstuffs, including US$1.1bn of meat, fish & dairy, US$686mn of cereal & flour (including 3.8% of Africa’s rice imports), US$234mn of sugar & US$177mn of palm oil in 2017.

Exports

Angola’s exports totalled US$33.7bn in 2017. Crude oil dominates exports, accounting for 90.5% of export revenues in 2017. That year, Angola exported crude oil worth US$30.6bn, making the country Sub-Saharan Africa’s second largest crude oil exporter (after Nigeria). The country also exported US$1.5bn of gas, mostly as LNG. Angola’s other significant mineral export is diamonds, worth US$1.2bn in 2017, most of which went for cutting to Belgium, India and China. The country’s other exports are minimal, making up just 1.6% of the balance.

  • Flag
  • Population
    29.03 M
  • Area
    1,246,700 sq km
  • Capital
    Luanda
  • Largest city
    Luanda
  • Official language
    Portuguese
  • Major languages
    Portuguese ,Umbundu and Kikongo
  • Currency
    Angolan kwanza

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