Angola: Economy grows at quickest pace in four years in Q4 2021
March 31, 2022
GDP growth gathered steam to reach 2.2% year on year in the final quarter of last year, up from 0.9% in the third and marking the fastest increase since Q4 2018. For the year as a whole, Angola’s economy expanded 0.7% over the prior period (2020: -5.6%), which marked the first expansion since 2015 as the economy exited a multi-year recession.
The headline improvement reflected a softer contraction in the key oil sector, which fell 2.8% year on year in the fourth quarter (Q3: -11.1% yoy). Despite activity still falling in the sector, the fourth quarter’s print marked the best result since the first quarter of 2020. Meanwhile, non-oil GDP growth eased from 7.3% in the third quarter to 4.0% in the fourth. The moderation was driven by softer growth in the commerce, agricultural, fishing, and transport and storage sectors. On the other hand, stronger growth in the manufacturing and construction sectors limited the cooldown.
On a seasonally-adjusted quarter-on-quarter basis, economic growth gathered pace, picking up to 1.6% in Q4, following the previous period's 0.5% expansion. This suggests that underlying momentum gained steam in the period.
The economy is set to gain further steam this year. On the domestic front, the rollback of Covid-19 restrictions have improved the outlook for the economy. Energy commodity prices have spiked in an already bullish oil market due to Russia’s invasion of Ukraine. With many sanctions placed upon Russia and Western countries looking for alternative sources, Angola is set to benefit, particularly if OPEC+ output quotas are raised—which the United Arab Emirates recently expressed being in favor of. Greater oil prices should also buoy the Angolan kwanza and improve the country’s fiscal and external positions. A stronger currency would exert downward pressure on inflation as well. That said, inflation remains elevated, which is a downside risk to the outlook, as is regional instability. Uncertainty surrounding August’s election and protests leading up to it further cloud the outlook.
Author: Jan Lammersen, Economist