Angola: Revised GDP data shows contractions in 2016 and 2017, pointing to more challenging conditions than previously thought
According to preliminary data released by the National Statistics Institute (INE), GDP contracted notably last year. The economy shrank 2.5% in annual terms in 2017 (previously reported: +0.9% year-on-year), broadly in line with the similarly large downward revision for 2016, to a 2.6% contraction (previously reported: +0.1% yoy).
The strong downgrade to the earlier figures was due to revisions in manufacturing output and public spending, published by the INE after a 15-month lull; it last published national accounts data in February 2017. As a result, revised figures point to a sustained recession in Angola over the last two years, suggesting economic conditions have been more challenging than previously thought. Meanwhile, revised quarterly data showed GDP contracting 4.3% from the previous year in the fourth quarter of 2017 (Q4 2016: -1.0% yoy), improving only slightly from the third quarter’s 4.7% fall (Q3 2016: -4.7% yoy).
The revised performance in 2017 was driven by a 22.1% dip from a year earlier in public administration, defense and compulsory social security. Together with a 9.5% contraction in the financial intermediation, insurance and pension fund sector, this drop outweighed growth in activity in other parts of the economy—most notably a 10.9% expansion in manufacturing and an 8.1% increase in petroleum extraction and refining. Subdued government spending was felt particularly strongly in the economy: A 35.0% year-on-year fall in subsidies and a 12.5% drop in tax collections had a notable impact on the overall result in 2017.
Angola’s economic outlook remains challenging, and the economy is still largely reliant on the performance of the oil sector. In 2017, the oil sector contributed 38.0% of GDP, followed by construction (14.0%), commerce (9.0%) and public administration (6.0%). Meanwhile, the country has been tapping into international debt markets to cover short-term financing needs; however, the magnitude of the needs, as well as the structural economic deficiencies, remains a key issue going forward. Other downside risks to the outlook stem from the potential further depreciation of the kwanza in the short- to medium-term, which would make foreign-denominated debt even more expensive.
According to the country’s macroeconomic stabilization plan, approved at the end of 2017, the government will seek to renegotiate the repayment terms of its external debt, while the Central Bank will move to adopt a more flexible exchange rate regime. The kwanza will be traded in a previously established range against the euro and the dollar.