Saturday, Aug 17, 2019
Industry & Trade | Africa | Angola

Angola's Economy: Encouraging macro numbers, continuing poverty


5 years ago

Banco Nacional de Angola headquarters in Luanda
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From independence in 1975 until the present, the Angolan economy has been dominated by the influence of oil production and exports, which have accounted for 60% of GDP, particularly in the most intense years of the civil war, when agriculture, trade, transport, construction and manufacturing were almost nonexistent.

Although, after the end of the civil war (2002), it was possible to invest heavily in other sectors, particularly in basic infrastructure (public investment between 2002 and 2013 amounted to $77.5 billion), the process of diversification of the national economy, in which the government, the business sector and the banking system are engaged, did not give tangible results. The oil sector continues to dominate the economy, with a relative weight of between 43% and 46% of the Gross Domestic Product. Moreover, this dominance also occurs in other indicators such as tax revenues (those originating in petroleum represented over three fourths of total tax revenues in 2013), export revenues (95% of the total exports) and international reserves. However, the tax realm has begun  to show noticeable signs of diversification, registering increases in other sources  of budget revenues (fiscal revenues from the non-oil sector) as a result of the Tax Reform Program (PERT) that is taking place.

In the macroeconomic area, results have been more significant and sustained, but other aspects are equally relevant. The communiqué issued by the Monetary Policy Committee of the National Bank of Angola  on January 27, 2014 regarding the results of 2013, rightly recognizes these developments: stability of the foreign exchange market; a 9.3% increase in credit to the economy, with a global amount in 2013 of $33 billion; an  inflation rate of 7.7% (in 2002 it was 105.6%), representing a safe path to price stability; and interest rates of 7.5% and 9 3% for  maturities of 3 and 12 months, respectively. The external position of the Angolan economy, measured by the stock of net international reserves and its dynamics of average annual variation is quite good ($30.6 billion  at the end of 2013 and an average annual growth rate of 24.8%), representing roughly nine  months of imports of goods and services.

The national economy has benefited from a number of positive factors and motivators for its growth. These include not only the economic policy measures implemented under government programs –it is in the process of implementing the National Development Plan 2013-2017, pending the results from 2013 – but also  factors of an external nature (upward  movement  of demand and prices in the international oil market; increasing trade relations with the most important and dynamic emerging economies) and domestic support,  as reflected in the provision of funds by the banking system and the State  to finance private investment.

Despite these conditions, the Angolan economy continues to suffer from structural deficiencies that the banking system has tried to alleviate by assisting and supporting the correct formulation of investment projects that are bankable. The lack of competitivity of  practically the entire non-oil economy is widely acknowledged, not only by international institutions (according to the Doing Business World Bank, Angola has consistently occupied the lowest place in the world ranking in several items), but also by national institutions designed to support growth. The latest evidence of this lack of competitiveness was given by the postponement, once again, of Angola’s request to join the Free Trade Area of the Southern African Development Community (SADC).

According to existing data, GDP should have grown at the average annual rate of 3.3% between 2009 and 2013, much lower than the approximately 10% growth in the 2002/2008 period. By 2017, the average annual economic growth rate - according to the IMF - should be around 5.5%, which does not allow significant improvement in the living conditions of the population (the population growth rate according to the National Statistics Institute, INE, is 3.2% per year).

Oil exports continued to be one of the most important factors of economic growth in 2013, with a contribution of just under 2 percentage points to the growth rate of 4.1% of GDP, despite the decrease between 2012 and 2013. According to the Relatório de Fundamentação do OGE 2014 (a background report that accompanies the government budget), the value of oil exports in 2013 was $65.124 billion dollars, compared to $68.960 billion dollars in 2012, a percentage decrease of 5.6%.

One of the obstacles to a greater diversification of the economy and the creation of a structural competitivity hasbeen the energy sector. The government is in the process of implementing an ambitious program of production and supply of electricity (about $17 billion  by 2017) - involving productive activities and families - which is expected to yield significant results for the living conditions of the population and the reduction of production costs in the economy.

GDP per capita has increased since 2002, reaching a value of $6,345, for a total value of economic activity of nearly $122 billion in 2013. However, Angola remains among the countries with a low level of human development, according to the United Nations; the national average monthly salary in 2012, according to the National Accounts, was only 37,000 kwanza, equivalent to about $370. The Gini index, which measures inequalities in income distribution, is 0.6 and has worsened since 2002. According to an official survey on the living conditions of the population, conducted in 2008/2009, about 60% lived on less than two dollars a day and 60% of the national income was concentrated in the hands of 20% of the population. The poverty rate officially presented (37%) is very controversial, given the actual living conditions of the population, especially in rural areas, where income differences are much more pronounced.

About the author: Manuel José Alves da Rocha, an Angolan economist, is associate professor at the Catholic University of Angola and Director of its Center for Studies and Scientific Research (CEIC). He is the author of 15 books on the economic and social reality of Angola and sub-Saharan Africa, the most recent one on capital flight from the region.



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