Angola: Economic and Political Overview
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Second largest oil producer in Africa, Angola also has the fifth largest GDP in sub-Saharan Africa. After a long civil war, the country posted one of the highest economic growth rates in the world, driven by its oil wealth. Angola was then severely affected by the fall in oil prices and by the fall in world demand (notably from China). In 2021, it entered its seventh year of recession (-0.7% GDP), hit by the COVID-19 pandemic, the collapse of oil prices and restrictions under the OPEC+ production agreement, but the non-oil sector started to recover. According to IMF estimates, the economy should pick up to 2.4% in 2022 and 3.3% in 2023, supported by the implementation of planned growth-enhancing structural reforms and a rebounding oil sector. A resurgence of Covid-19 infections, social unrest and weakened public finances are potential downside risks.
Already impacted by decreasing oil revenues since 2015, the Angolan economy was further hit by the Covid-19 pandemic that broke out in 2020. In 2021, higher oil prices, loosened restrictions, policy discipline and commitment to reforms helped the economy to start recovering. In addition to the stimulus plan designed to tackle the social impacts of the crisis, the authorities pursued the three-year reform program supported by the IMF. It aimed to restore external and fiscal sustainability, improve governance, and diversify the economy to promote sustainable, private sector-led economic growth (IMF). Fiscal discipline lead to a substantial budget surplus of 2.6% GDP in 2021, a trend that is projected to continue in 2022 (2.1% GDP) and 2023 (2.5% GDP) (IMF). Despite being still very high, public debt dropped from an estimated 136.5% GDP in 2020 to 103.7% GDP in 2021 (IMF). It is forecast to further decline to 90.8% GDP in 2022 and 83.3% GDP in 2023 (IMF). Driven by supply-side factors, inflation soared to an estimated 24.4% in 2021, and should gradually decline to 14.9% in 2022 and 9.9% in 2023, as global food inflation moderates and the central bank maintains a tight policy stance (IMF). The IMF-supported program came to an end in 2021, but the Angolan authorities remain committed to their plan of economic reforms, as reflected in the prudent fiscal stance adopted in the 2022 budget. Among the many challenges faced by the country, strengthening debt sustainability, addressing the financial sector’s weaknesses, diversifying the economy, improving governance and developing human capital and infrastructure should be key priorities (IMF).
President Joao Lourenço initiated numerous reforms aimed at reducing the influence of the dos Santos family on the economy, improving the perception of the business climate and getting the country out of the crisis, but the social situation of Angola remains tensed. Inequalities, economic sluggishness and inflation are nourishing people's dissatisfaction. Only a third of the population has access to electricity. The income per capita has been gradually increasing, especially in the metropolitan regions, but poverty and unemployment rates remain high. According to the African Development Bank, the pandemic is expected to exacerbate the 2019 official poverty incidence of 40.6%. Poverty is more dominant in rural areas (58%) than in urban areas (19%). The unemployment rate rose to 34% in the third quarter of 2020, with youth unemployment rising to a high of 56.4% (AFDB). According to the World Bank data (modelled ILO estimate) unemployment rate was at 7.7% of labour force in 2020. Violence in the region of Kasaï (Democratic Republic of Congo) provoked the arrival of more than 30,000 refugees in Angola.
| Main Indicators | 2020 | 2021 | 2022 | 2023 | 2024 |
| GDP (billions USD) | 58.13 | 75.18 | 124.79 | 135.56 | 142.20 |
| GDP (Constant Prices, Annual % Change) | -5.8 | 0.8 | 2.9 | 3.4 | 3.9 |
| GDP per Capita (USD) | 1,873 | 2,352 | 3,791 | 3,998 | 4,071 |
| General Government Balance (in % of GDP) | 0.5 | 2.4 | 0.8 | -0.9 | -0.7 |
| General Government Gross Debt (in % of GDP) | 136.5 | 86.4 | 56.6 | 52.5 | 47.9 |
| Inflation Rate (%) | 22.3 | 25.8 | 21.7 | 11.8 | 9.9 |
| Current Account (billions USD) | 0.87 | 8.40 | 14.13 | 7.35 | 3.68 |
| Current Account (in % of GDP) | 1.5 | 11.2 | 11.3 | 5.4 | 2.6 |
Source: IMF – World Economic Outlook Database, October 2021
Angola is Africa's second largest oil producer, a net producer of natural gas and also the third largest producer of diamonds in the continent, surpassed only by Botswana and the Democratic Republic of Congo. The Angolan economy - the fifth largest in sub-Saharan Africa - is dominated by the oil and gas industry, which accounts for about 50% of its GDP and is the primary source of revenue for the country (more than 70% of government revenue and 90% of Angola's exports come from oil activities). In addition to diamonds, the country also produces gold, granite, gypsum, marble, and salt, and possesses numerous undeveloped minerals with potential for extraction including beryllium, clay, copper, iron-ore, lead, lignite, manganese, mica, nickel, peat, phosphate rock, quartz, silver, tungsten, uranium, vanadium, and zinc. The industrial sector represents 45.9% of GDP and 7% of employment.
Despite its potential, the agricultural sector is underdeveloped and not very productive, contributing to 9.5% of GDP but employs 51% of the population. Only about a third of Angola's arable land is used for harvests; of those, only 100,000 out of 5 million arable hectares benefit from machinery and/or animal traction for sowing and harvesting. Angola's agriculture mainly consists of subsistence farming. The key industrial crops are coffee and cotton. The Government heavily invested in coffee, sugarcane and ethanol productions, which should help to diversify agricultural revenues and exports.
The services sector (banking, communication, tourism) is also growing rapidly, accounting for 39.6% of GDP and employing 42% of the population. Tourism is growing, although there is a severe shortage of hotels and other types of accommodation. The construction sector is booming (9% of GDP), driven by a large reconstruction program launched by the government.
The supply and demand shocks induced by the COVID-19 crisis particularly affected the oil sector, mining production and transportation and services, which were hit hard by the lockdowns. In 2021, manufacturing, trade and construction sectors drove the recovery while the oil sector remained downbeat (Focus Economics).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 50.7 | 6.8 | 42.5 |
| Value Added (in % of GDP) | 7.9 | 44.1 | 46.5 |
| Value Added (Annual % Change) | 17.2 | -8.3 | 6.2 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
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Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: March 2023
