Angola Economic Forecast

Annual GDP growth decelerated in Q1, dented by a sharper contraction in the oil sector and weaker growth in the agricultural, industrial and services sectors. In Q2, the economy likely picked up steam, buttressed by lower inflation and higher oil output than in the prior quarter. Nonetheless, an over 60% depreciation of the kwanza in the period reignited price pressures towards the end of Q2 and likely distorted the economy at large. Shifting to Q3, activity should remain healthy thanks to the stabilization of the kwanza; higher oil output and prices in recent months relative to early 2023 boosted international reserves, enabling the Central Bank to resume interventions in the foreign-exchange market to support the currency. Additionally, in mid-July, the government announced a series of stimulus measures, including VAT cuts and the simplification of administrative procedures.

Inflation increased to 13.6% in August from 12.1% in July. Sustained kwanza weakness and the phasing out of fuel subsidies continued to drive inflation upwards. Inflation is seen remaining elevated in the coming months. Key factors to monitor are the path of monetary policy, FX interventions and the strength of the kwanza.