Angola: Angolan economy recovers in 2017 from 2016 slump
March 15, 2018
The Angolan economy picked up steam last year, according to the latest data released by the Ministry of Finance. Economic growth jumped from 0.1% in 2016 to 0.9% in 2017 on the back of a recovery in the non-oil sector. Activity, however, remains depressed, and conditions extremely challenging. GDP growth last year came in below the government’s forecast of 2.1%.
The acceleration was driven by faster growth in the non-oil sector, which more than offset a contraction in the oil sector. The expansion in the non-oil sector accelerated from a 1.2% increase in 2016 to 1.9% in 2017, a three-year high. Nevertheless, the 2017 print fell below the government’s forecast of 1.9% for the non-oil sector. Growth in 2017 was buttressed by key sectors, including construction, agriculture and the energy. The energy sector expanded 40.2% as new electric generating plants were inaugurated and joined the national power grid. On the other hand, the contraction in the oil sector eased from a sharp 2.3% decline in 2016 to 1.0% in 2017. Output in the sector continues to be constrained by production cuts as part of the OPEC and non-OPEC oil output cut deal.
The country’s economic outlook remains challenging, despite the acceleration in GDP observed last year. Public accounts are in bad shape due to subdued oil earnings, and the fiscal deficit widened last year despite severe austerity measures (2017: -5.3%; 2016: -4.5%). Moody’s placed Angola’s B2 rating under review for a downgrade on 7 February over concerns of the country’s debt sustainability. The country has been tapping international debt to cover financing needs in the short-term, and fears of a ballooning debt burden have been exacerbated by the currency devaluation of early January. Furthermore, the debt burden could increase if the kwanza depreciates further this year and next, which would make the amount of foreign-denominated debt much higher.