of health and education reduce the poten- tial productivity of a child born in Angola ANGOLA Key conditions and to 36 percent what it could be. Investments in human capital will require sustainably challenges increasing spending and improving man- agement and accountability to ensure re- Table 1 2022 Angola’s economic fortunes have been tied sults. Investments in education and health Population, million 35.0 to global oil demand, which brought have been complemented with the roll-out GDP, current US$ billion 122.1 volatile growth and left Angola with high of a social registry and the Kwenda cash GDP per capita, current US$ 3486.5 levels of poverty and inequality. Reforms transfer program in 2020, with close to a a 31.1 International poverty rate ($2.15) over the past 5 years have improved million rural households registered. A a 52.9 macroeconomic management and public broader social safety net with adaptable in- Lower middle-income poverty rate ($3.65) a 78.0 sector governance. Macroeconomic stabili- come support could substantially reduce Upper middle-income poverty rate ($6.85) Gini index a 51.3 ty has been enhanced through a more flex- extreme poverty, mitigate the impact of School enrollment, primary (% gross) b 85.0 ible exchange rate regime, central bank au- shocks on households, and support invest- b 62.3 tonomy, sound monetary policy, and fiscal ments in human capital. Life expectancy at birth, years consolidation. Laws to allow greater pri- Total GHG emissions (mtCO2e) 126.3 vate sector participation in the economy, Source: WDI, Macro Poverty Outlook, and official data. increase the stability of the financial sec- a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2020). tor and reduce the impact of oil revenue Recent developments volatility on public finances have also been introduced. GDP growth accelerated in 2022 to an es- High poverty is linked to a lack of good- timated 3.5 percent - the first time since quality jobs: 80 percent of jobs are infor- 2014 that it outpaced population growth - Growth accelerated in 2022 due to in- mal, and half are in the primary sector (of- thanks to a small rebound in oil produc- creased oil production and higher oil ten subsistence work). Urban and youth tion and high oil revenues. Higher oil prices allowing for an expansive fiscal unemployment remain high, exceeding 38 prices allowed for fiscal expansion, espe- stance in an election year. With an appre- percent and 50 percent, respectively. Eco- cially in public investments, and appreci- nomic diversification remains elusive ation of the domestic currency, underpin- ciating currency and food prices easing, while oil production is declining and glob- ning strengthening domestic demand and inflation declined rapidly, and poverty fell al decarbonization looms in the medium- generating growth in private consumption to 32.7 percent. Growth is expected to term. Angola needs to urgently invest in estimated at around 5 percent. The oil sec- moderate in the near-term, bogged down removing barriers to private sector in- tor contributed to this recovery with a by the oil sector. Risks are elevated due to vestment to achieve economic diversifica- growth of 1.4 percent, the first expansion tion to support growth, job creation, and since 2015. Non-oil output accelerated excessive dependence on oil revenue, with poverty reduction. with agriculture and fisheries growing al- policies aimed at removing market distor- Given the jobs challenge, high poverty, most 7 percent and the services sector re- tions and enhancing resilience remaining and a rapidly growing population, invest- covering to pre-COVID-19 levels. Con- a high priority. ing in human capital and poverty reduc- struction activity expanded, benefitting tion is a top priority. Inadequate provision from higher government investment in the FIGURE 1 Angola / Real GDP growth and contributions to FIGURE 2 Angola / Actual and projected poverty rates and real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 6 90 30000 4 80 25000 2 70 60 20000 0 50 -2 15000 40 -4 30 10000 20 -6 5000 10 -8 2020 2021 2022e 2023f 2024f 2025f 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 Agriculture Oil industry Non-oil industry International poverty rate Lower middle-income pov. rate Services Total Upper middle-income pov. rate Real priv. cons. pc Sources: Angola National Institute of Statistics and World Bank. Source: World Bank. Notes: see Table 2. MPO 1 Apr 23 context of improved financial conditions levels, especially on investment and fuel Inflation is expected to remain on a moder- and an election year. subsidies. However, the non-oil primary ating trend, however possible adjustments With higher oil prices, the currency appre- deficit, a measure of the structural fiscal in regulated prices, especially for fuel, ciated by 26.2 percent in 2022, though ap- position, increased to 7.7 percent of GDP, could temporarily increase prices. The cur- preciation pressures have receded since up from 4.8 percent in 2021 and above rent account surplus is expected to narrow late 2022. The current account surplus the government’s medium-term target of gradually, as growth in non-oil exports stood at about 11 percent of GDP, driven 5 percent. Debt-to-GDP declined to about will be insufficient to offset the declining by high growth in oil exports (51 percent 65 percent, with proactive debt manage- trend of oil production and the expected year-on-year). International reserves stood ment, including purchase of outstanding reduction of oil prices, while import at US$14.5 billion dollars at the end of Eurobonds reducing near-term external growth remains robust. The flexible ex- 2022, or about 6 months of imports. financing needs. change rate is expected to mitigate the Inflation has fallen rapidly, allowing the pressures on external reserves and serve Central Bank to moderately loosen mon- as a first line of defense against external etary policy. The year-over-year rate fell shocks. External financing requirements from 27 percent in December 2021 to 13.9 Outlook resulting from the large external debt ser- percent in December 2022, the lowest rate vice are met by bilateral and multilateral since 2015. As inflation pressures subside, Due to decreased oil production and loans, bond issuances and, increasingly, the Central Bank lowered the reference reduced fiscal impulse, growth is ex- foreign direct investment. rate from 20 percent until September 2022 pected to moderate to 2.6 percent in Fiscal accounts are expected to remain bal- to 18 percent by January 2023. 2023, falling once again below popu- anced in the absence of new oil price Positive per capita growth and slowing in- lation growth (3.1 percent). Growth in shocks. The 2023 budget targets a small flation are expected to have reduced the non-oil economy, especially in agri- overall fiscal surplus. A significant decline poverty at $2.15 per day (2017 PPP) by 0.4 culture, construction and services is ex- of oil prices could result in a fiscal deficit percentage points to 32.7 percent, yet the pected to remain robust, with non-oil and increased financing needs. Fuel sub- number of people living in poverty contin- GDP growth exceeding four percent an- sidy reform, which the government in- ued to grow, surpassing 11.4 million. nually. While the poverty rate is expected tends to undertake in the course of 2023, The government achieved a fiscal surplus to continue marginally decreasing, due to could free up fiscal space that can be used of 2.7 percent of GDP, despite expen- rapid population growth, the number of for greater investments in poverty reduc- diture significantly exceeding budgeted poor will surpass 11.7 million. tion and human capital formation. TABLE 2 Angola / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022e 2023f 2024f 2025f Real GDP growth, at constant market prices -5.6 1.1 3.5 2.6 3.3 3.1 Private Consumption -3.3 6.4 5.5 4.0 4.0 4.0 Government Consumption -8.2 -6.4 -1.6 10.1 25.0 12.3 Gross Fixed Capital Investment -15.5 9.2 -0.6 3.7 0.2 1.0 Exports, Goods and Services -6.2 -10.7 1.5 -1.3 -3.5 -3.4 Imports, Goods and Services -19.6 -18.3 13.8 9.6 7.0 0.8 Real GDP growth, at constant factor prices -6.8 -0.1 3.4 2.5 3.1 2.9 Agriculture 2.8 17.2 6.8 4.6 4.6 5.0 Industry -10.5 -8.3 2.1 0.3 -1.1 -0.7 Services -3.9 6.2 3.9 4.2 6.7 5.7 Inflation (Consumer Price Index) 22.3 25.8 21.4 9.8 4.4 3.5 Current Account Balance (% of GDP) 2.4 5.8 13.5 8.6 9.1 9.2 Net Foreign Direct Investment Inflow (% of GDP) 3.3 4.5 4.8 1.5 0.6 1.3 Fiscal Balance (% of GDP) -1.9 3.9 2.6 1.9 0.1 -0.1 Revenues (% of GDP) 20.8 24.1 24.4 22.7 20.6 19.2 Debt (% of GDP) 130.7 85.7 64.5 60.7 54.9 50.8 Primary Balance (% of GDP) 4.9 9.3 7.0 6.0 3.6 3.0 a,b International poverty rate ($2.15 in 2017 PPP) 33.6 33.1 32.7 32.6 32.5 31.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 54.8 54.4 54.2 54.1 54.0 53.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 80.8 80.2 79.8 79.7 79.5 78.8 GHG emissions growth (mtCO2e) 0.3 -1.7 -0.1 -0.5 -0.8 -0.8 Energy related GHG emissions (% of total) 16.3 16.0 17.3 18.5 19.3 20.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-IDREA. Projection using point to point elasticity at regional level with pass-through = 0.7 based on private consumption per capita in constant LCU. b/ Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. MPO 2 Apr 23