Angola: The economy remains in recession at the outset of 2018
August 28, 2018
According to national accounts data released by the Statistical Institute (INE) on 28 August, the economy remained in recession in the first quarter. The Angolan economy has been in recession for over two years now following an oil price collapse in 2014, which has devastated the public finances of the oil-dependent economy. A breakdown by sector showed that GDP shrank 2.2% in annual terms in Q1—underperforming market expectations—although this was an improvement from the previous quarter’s 4.3% contraction. The first-quarter result was primarily driven by significant contractions in the oil extraction and refining, and trade sectors.
Worse-than-expected economic growth at the outset of the year was likely one of the key reasons behind the government’s recent decision to seek a loan from the IMF. Given the immense challenges facing the economy, a loan should help to reduce borrowing costs and would likely provide the government with greater political cover as it pushes forward with a stricter economic-reform and anti-corruption agenda. Nevertheless, significant improvement in the short-term seems unlikely partly because of the expected long-lasting effect of the unsustainable fiscal policies favored in the run-up to last year’s elections.
Author: Almanas Stanapedis, Economist