Economical overview
Angola is Africa's third largest economy
(after Nigeria and South Africa) and the continent's
second largest oil producer (after Nigeria). The
extensive oil recovery is behind the record-breaking
growth of the previously war-torn country since the end
of the war in 2002. Nowadays, crude oil accounts for
almost all of Angola's export income and for almost
three-quarters of the state's revenue.
However, the country's huge oil dependency led to
major problems when the world market price of oil began
to fall in the summer of 2014. Just over a year later,
the price of oil had more than halved. As a result, the
government has been forced to cut sharply in the state
budget.
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While oil extraction, along with diamond mining (see
Natural Resources and Energy), is of the utmost
importance to Angola's economy, eight of ten Angolans
still rely on cultivation for their own use on small
farms. The lucrative oil industry, like the diamond
trade, creates extremely few jobs for the residents.
Only one percent of the working population is active in
these two sectors. In addition, widespread corruption in
the oil industry and the diamond industry leads to a
disappearing small share of the income for the
population. Instead, the money stays in the pockets of
the political and economic elites.
Small-scale agriculture is outdated and neglected,
and it is periodically affected by drought, no later
than 2015. Extensive famine disasters have been largely
avoided thanks to international food aid - both during
the 1975–2002 war and later. The oil money has made
Angola import most of all food at high prices, which has
mainly benefited the well-off.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including AGO which represents the country of Angola.
The oil crisis since the summer of 2014 shows the
great need to broaden Angola's economy. Transport, light
industry, trade and other services are growing, even if
it is from a low level.
Economic development is hampered by corruption as
well as by extensive bureaucracy, inadequate
infrastructure and a poorly educated workforce. The
government's national industrialization plan for
2013–2017 includes investments in special economic
zones, tax relief and increased opportunities for credit
for small and medium-sized enterprises.
The war destroyed the economy
During the colonial era, the economy of the
Portuguese colony was diverse and thriving, but it was
destroyed for nearly three decades by civil war. The
country's infrastructure, such as bridges and roads, was
destroyed and lots of hospitals and schools were
demolished. In addition, the educated elite - the
Portuguese - left the country at independence in 1975
and brought most of the value (see Modern history).
Until the mid-1980s, the Soviet-inspired regime
controlled all economic activity and resources were
distributed through arbitrary political decisions. The
country lacked a central bank until the early 1990s, and
the state budget was usually exceeded shortly after it
was submitted. The Ministry of Finance lacked control
over all income and expenditure, as many financial
decisions were made (and often still are today) in the
presidential palace.
As the money lost its value, the country was moving
more and more towards a clean exchange economy. In the
early 1990s, half-hearted attempts were made to reform
the economy, but with very limited results. When the war
resumed in 1992, many of the goals had to be abandoned.
New money was printed in ever-increasing numbers to
cover a growing budget deficit, and inflation soared,
with a record-breaking above 5,000 percent in 1996; at
the turn of the millennium, it was at 325 percent.
After the 1994 peace agreement, Angola experienced
some years of growth, about 8.5 percent a year -
admittedly from a very low level. In 1999, when the
civil war raged again, the World Bank threatened to no
longer pay out loans to Angola unless the government
took drastic measures, including against the corruption.
After a currency reform was implemented and freer import
rules were introduced, the International Monetary Fund (IMF)
was able to launch a monitoring program in 2000, but the
fund soon found that the regime did not do enough to
fight corruption, and the program was canceled the
following year.
In the years following the end of the war in 2002,
contacts with the IMF were often marked by irritation
and they were completely broken in 2007, when Angola's
oil income reached peak prices. However, the country had
difficulty attracting foreign investment outside the oil
and diamond industry, and aid for reconstruction was
delayed. The regime instead borrowed money that would be
repaid with future oil deliveries, which was costly and
risky. The loans contributed to a growing foreign debt.
Oil tree in Luanda
In 2009, Angola was threatened by an acute budget
crisis in the wake of the international financial crisis
and drastically falling oil prices. The government was
forced to turn to the IMF again and was granted a loan
of US $ 1.4 billion until 2012. At the same time, the
IMF requested economic reforms to get the private sector
developing.
Since 2012, Angola has a government investment fund,
which mainly consists of surplus from oil exports. The
fund will protect the country's economy from severe
cyclical fluctuations and, above all, sudden race for
oil prices. Funds will be used to develop agriculture,
electricity and water supply as well as the transport
sector to promote foreign investment in infrastructure.
Growth in the economy during the 2000s has been rapid
but also varied with the state of the world economy and
the price of oil. During the three years following the
2002 peace agreement, the economy grew by an average of
almost 12 percent per year. GDP growth in 2007 was
record high, over 23 percent, to then collapse and fall
below 2 percent in 2010. Four years later, it had risen
to 4.5 percent, but with falling world market prices for
oil thereafter, growth was expected to decline again.
The high oil revenues and loans and investments from
mainly China (see below) have in recent years set a
track especially in the capital Luanda. Intensive
construction has been ongoing there, with luxury hotels,
improved roads and new suburbs, as well as a nationwide
state network of major shopping malls and modern
markets.
Poor insight into the regime's business
The previously soaring inflation had been pushed down
in 2006, but this was mainly due to the central bank
selling large amounts of dollars to support the local
currency, kwanza. Rising fuel prices drove inflation up
again in 2010, while the four years later had turned
down again.
In 2010, Angola received foreign credit ratings from
credit rating agencies such as Moody's, Standard &
Poor's and Fitch for the first time. This created new
conditions for the country to borrow in the
international market after Angola had China as the
dominant lender. In June 2015, however, President dos
Santos signed a new multi-billion dollar loan agreement
with China. China has loaned Angola around $ 20 billion
since 2002, and the loans have often been repaid in the
form of oil or cash to one of the many Chinese companies
operating in Angola.
The lack of transparency in the government's business
has remained a problem for Angola and makes data on the
overall economy uncertain. The administration has been
ineffective, the corruption widespread and the informal
sector of the economy has grown. The tax system needs
reform. Payment problems in 2008–2009 led to the IMF
from 2011 tried to control budget management with
quarterly funding plans for each department, so that
only available resources were used; In August 2015, the
IMF initiated an evaluation of the measures and how
Angola coped with the reduced oil revenues.
FACTS - FINANCE
GDP per person
US $ 3,432 (2018)
Total GDP
US $ 105,751 million (2018)
GDP growth
-2.1 percent (2018)
Agriculture's share of GDP
10.0 percent (2017)
Manufacturing industry's share of GDP
6.6 percent (2017)
The service sector's share of GDP
46.8 percent (2017)
Inflation
17.2 percent (2019)
Government debt's share of GDP
89.0 percent (2018)
External debt
US $ 37 201 million (2017)
Currency
kwanza
Assistance per person
$ 7 (2017)
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