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Overview

Recent Developments & Prospects

Macroeconomic Policy

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Economic Cooperation, Regional Integration & Trade

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Thematic analysis: Structural transformation and natural resources

Authors: Joel Daniel Muzima, Fernanda Ramalho Mendy

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  • Angola’s economy will suffer from significantly lower oil prices, with GDP growth expected to decelerate to 3.8% in 2015 and 4.2% in 2016, down from the 4.5% registered in 2014.
  • Structural reforms are imperative to enhance efficiency in the allocation of resources and create the conditions for a faster rate of economic growth and equitable development in the future.
  • Improved management of income from non-renewable resources is needed to enhance spatial inclusion and create savings for future generations.

The Angolan economy was hard hit by the sharp decline in international oil prices, as well as a temporary reduction in oil output due to unscheduled maintenance of oil fields, and prolonged drought. Nonetheless, sound macroeconomic policies helped to ensure an economic growth rate of 4.5% in 2014, down from 6.8% in 2013. Angola will suffer from significantly lower oil prices over the 2015/16 horizon. Lower oil prices are expected to lead to sizeable cuts in public spending and a consequent deceleration of GDP growth to 3.8% in 2015. But growth is expected to rebound to 4.2% by 2016.

Growth and equitable development are constrained by the adverse business environment, inadequate governance and transparency in the management of public resources, weak quality and maintenance of physical infrastructure, limited quality of human resources, weak agriculture growth, inefficient public service delivery to the poor, and difficulties in managing income from non-renewables to create savings for future generations. Social pressures are increasing due to the high unemployment rate (26%), particularly among youth; significant poverty, affecting 36.6% of the population; and high income inequality, with a Gini coefficient of 55.3. In this context, structural reforms are imperative to accelerate economic diversification, reduce dependency on natural resources, increase productivity, improve the allocation of resources and create the conditions for a faster rate of economic growth and equitable development.

Large and persistent regional inequalities were exacerbated by more than 27 years of war, which triggered an unprecedented migration from rural to urban areas. The Public Investment Programme has helped improve regional allocation of public resources, but more efforts are required to improve the quality and availability of economic and social infrastructure. Cognisant of the spatial conflicts that may arise from the economic isolation of regions and populations, largely induced by war, the government approved a mix of tax breaks, accelerated provision of physical infrastructure in special economic zones and the development of industrial poles as part of the National Industrialisation Programme, 2013-2017. Access to credit for small and mediumsized enterprises is being eased and economic corridors to reduce regional asymmetries are being developed. Meanwhile, fiscal decentralisation remains limited, with 80% of public resources administered at the central level. The population census of May 2014 is expected to be used in the design of a comprehensive National Population Policy that will help anticipate the consequences of population growth and the subsequent pressure on natural resources.

Table 1: Macroeconomic indicators

 20132014(e)2015(p)2016(p)
Real GDP growth6.84.53.84.2
Real GDP per capita growth3.71.40.71.1
CPI inflation8.87.488.7
Budget balance % GDP0.3-2.2-10.6-7.7
Current account balance % GDP5.82.7-5.9-2.2

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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