Angola: Economy remains stuck in recession in Q4 2019
The economy contracted 0.8% on an annual basis in the fourth quarter, softening slightly from the previous quarter’s 1.2% fall (previously reported: -0.8% year-on-year), according to national accounts data released by Angola’s Statistical Institute (INE) on 17 April. As a result, the economy shrank 0.9% annually in 2019, softening from the 2.0% decline in 2018 (previously reported: -1.2% yoy) and marking the fourth consecutive year of contraction.
The all-important oil sector, which accounts for around one-third of GDP, led the economy to contract in the fourth quarter. Oil sector activity seemingly shrank for the 15th consecutive quarter at the end of 2019, albeit at a slightly softer pace than in Q3, as slumping domestic output outweighed higher global crude prices in Q4. That said, accelerating output growth in the commercial sector, a marked rebound in the transportation sector and resilient construction activity growth all softened the overall decline in Q4.
Looking forward, a rapidly deteriorating global economic backdrop due to the Covid-19 pandemic and collapsing global oil prices paint a gloomy picture for Angola’s economy. Widespread lockdowns in efforts to contain the Covid-19 pandemic hammered global demand for oil. This, coupled with elevated production (despite unprecedent OPEC+ supply cuts announced on 12 April), is set to weigh on oil prices through year-end, which will severely drag on Angola’s exports in 2020. Declining domestic oil production levels are set to further exacerbate the external sector downturn. Meanwhile, domestic activity in Angola is also likely to be hit hard in 2020 due to lockdown measures introduced soon after President João Lourenço declared a state of emergency on 27 March.