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Angola Spotlight


2017 recovery will be tepid. After a tough 2016 during which economic activity dipped into negative territory for the first time since the early 1990s, there are tentative signs of a 2017 uptick. The slide reflected a contraction in oil output, which accounts for 40% of GDP as well as 97% of exports and over 75% of government revenues. Along with the persistence of weak oil prices this has fed through to non-oil activity with the slide in the Kwanza, FX shortages, rise in inflation and tightening of monetary policy weighing on households and businesses alike,

Spurred by a modest recovery in oil output. The surprising decline in oil output last year should be reversed by production from new fields including the East Hub Development project by ENI as well as the resumption of liquefied natural gas (LNG) output at Soyo. The government has also borrowed heavily in recent months, especially from China, ostensibly to help finance a pickup in infrastructure spending ahead of the summer election.

At the same time US dollar shortages have eased a little on the back of higher crude prices while base effects have also pushed annual inflation down from its peak of over 40% in December to 37% in March. While we expect headline price growth to ease from over 32% last year to below 29% in 2017, a sharper-than-expected devaluation of the Kwanza poses an upside risk to prices.

Politics as usual? Last year the ruling MPLA announced that President dos Santos would not stand for re-election in the upcoming elections which are scheduled for August. The party has chosen Joao Lourenco, a former defence minister, as its candidate. However, there are deep tensions within the MPLA regarding the President's children who head up the sovereign wealth fund and the state-owned oil operator, Sonangol. These stresses may have prompted a ministerial reshuffle last September which saw the dismissal of the Finance Minister. While another landslide MPLA victory is expected (it received over 70% of the vote in 2012) the flimsy economic backdrop, perceived corruption, and wealth inequality have sparked bouts of popular discontent which, although having been dealt with harshly by the police, look set to intensify in the coming months.