ANGOLA

Key conditions andchallenges

Table 1

2023

Population, million

36.1GDP, current US$ billion

92.2

GDP per capita, current US$2549.9

International poverty rate ($2.15)

a31.1
a52.9

a78.0

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a51.3

School enrollment, primary (% gross)

b88.6

b61.6

Total GHG emissions (mtCO2e)

110.5Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2018), 2017 PPPs.
b/ Most recent WDI value (2021).

In 2023, lower oil production and an exchange rate shock led to economic stagnation. The May-June currency slide continues to fuel inflationary pressures. Lower tax revenues, larger interest payments
and higher fuel subsidies led the government to cut other expenses. The non-oil
sector would drive growth since 2024,
but risks to the outlook remain high due
to over-reliance on oil. Poverty is projected to grow marginally to 36.1 percent.

Angola’s economy remains overly dependent on the oil sector, which accounts for a quarter of GDP, 60 percent of tax revenues, and 95 percent
of exports. Oil production is in structural decline due to oil depletion andlack of investment, falling from 2 million to 1.1 million barrels per day between 2010 and 2023. The reliance on
oil has led to high vulnerability to external shocks, undermining macroeconomic stability, and stunted the nonoil economy through strong real exchange rate appreciation, limiting economic diversification and job creation.
Among those employed, 80 percent areinformal, and half are either self-employed with no employees or unpaid
workers of family enterprises. Women
face higher unemployment and are
more likely to be informal (89 percent
compared to 72 percent for men).
Progress has been made in enhancing
macro-fiscal stability through exchange
rate liberalization, central bank autonomy, and fiscal consolidation. However,while these efforts should be accelerated,
greater economic diversification is needed to boost economic growth and reducepoverty, particularly in the context of theglobal energy transition. Between 2015
and 2022, real GDP per capita fell by 28
percent, reinforcing the need for a morediversified and inclusive growth strategy.

Angola’s poverty rates stand above what
would be expected for a country with its
GDP level: as of 2018, a third lived on lessthan $2.15 per day. Building human capitalis a key priority for reducing poverty andboosting growth. Limited access to healthand education reduces the productivity ofan Angolan child to a third of his or her potential. Important progress is being madein building a social safety net, including
the flagship cash transfer program Kwenda that has registered 1.5 million rural
households and initiated payments to 1.03
million beneficiaries. Yet, urban households remain uncovered and vulnerable tofood price shocks.

Recent developments
The 2023 real GDP growth has been revised downward from 1.3 to 0.8 percent
since the previous MPO. Oil production
in 2023 (1.11 million b/d) fell short of
the government’s expectations (1.18 million b/d) due to a longer-than-expected maintenance shutdown at a major oilfield. The non-oil sector slowed down
due to a cost-push shock to key inputs
from a one-off adjustment in gasoline
prices and a sharp currency depreciation.
The economic stagnation reduced government revenues, especially those fromthe non-oil sector.
The value of oil exports fell by 27 percent
in 2023 due to lower oil prices and production. This, together with large debt
service payments, reduced the supply offoreign currency, which triggered aFIGURE 1 Angola / Real GDP growth and contributions toreal GDP growth

FIGURE 2 Angola / Actual and projected poverty rates andreal GDP per capita

Percent, percentage points
6Poverty rate (%)

480

Real GDP per capita (constant LCU)

90

70000
60000

70

2

50000

60

0

50

40000

-2

40

30000

-430

20000

20-6

10000

10-8
2020
2021
Agriculture
Services

2022

2023e
2024f
Oil industry
GDP02025f
2026f
Non-oil industry

02008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Sources: Angola National Institute of Statistics and World Bank.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

MPO

1Apr 24

40 percent depreciation in May-June 2023
and widened the gap between the official
and the parallel exchange rates. The slidein the kwanza resulted in higher-than-expected interest payments and fossil fuelsubsidies, to which the government responded with cuts in other expenses. The
depreciation has also fueled inflationarypressures as year-on-year inflation soared
from 11.5 percent in February 2023 to 24
percent in February 2024. The increase ingasoline prices in June 2023 further fueledinflation. The National Bank of Angola
raised its policy rate by 100 basis points
to 18 percent in November and then to19 percent in March.
The economy is not generating enough jobs
to keep up with Angola’s growing working
age population. Between Q4 2022 and Q42023, over 550,000 new workers joined thelabor force, but only 10,000 jobs were added.
Urban and youth unemployment surged to
42 and 58 percent in Q4 2023, respectively,
up from 39 and 53 percent a year earlier.
While the share of jobs in the primary sector grew by 1.1 percentage points, jobs incommerce fell by 2.5 percent.

Outlook
Growth is expected to rebound to 2.8 percent in 2024 and then remain at similar
rates. Non-oil sectors would drive this recovery, as oil production is projected tofall by 2.5 percent in 2024 and then stagnate due to oil depletion and lack of investment. Hence, on the demand side, exports are expected to stall, while both final
consumption and gross fixed capital formation drive growth. Achieving higher
growth rates will depend on the efforts todiversify the economy.
Year-on-year inflation is projected toreach around 28 percent by mid-2024 andthen decline to around 12 percent by
end-2026. Monetary policy tightening, together with a conservative fiscal stance,
is expected to contain inflationary pressures. In addition, the stock of international reserves (7 months of imports), andthe imminent monetary loosening in theUS would reduce downward pressureson the kwanza and, thus, on inflation.

TABLE 2 Angola / Macro poverty outlook indicators

Food inflation, combined with a weakening labor market and a decline in percapita growth, suggests that poverty may
increase to 36.1 percent in 2024, whichcorresponds to almost 13.5 million Angolans living on less than $2.15/day.
The economic outlook faces several
downside risks, primarily driven by lower-than-expected oil prices and production. Lower oil revenues could lead toadditional public spending cuts, impacting economic growth, and greater inflationary pressures resulting from a weaker currency. Further monetary tightening
to combat inflation would also delay theeconomic recovery. Increasing efforts todiversify the economy has become essential to reduce the impact of oil pricevolatility on public finances, economic
performance, and poverty reduction. In
the near term, it will also be important toaddress food insecurity, tackle high unemployment, especially among the urban
poor, and protect against human capital deterioration by ensuring that all Angolan children have access to adequate
nutrition, medical care, and education.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
1.2
4.0
-2.9
7.4
-8.6
-3.8

2022
3.0
5.4
3.6
8.1
3.3
26.1

2023e
0.8
2.3-15.3
4.6
-2.8
-7.3

2024f
2.8
4.6
5.1
1.4
-2.5
-3.3

2025f
2.7
4.0
2.7
2.7
0.0
2.2

2026f
2.4
3.0
2.4
2.8
0.0
1.3

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

-0.1
17.2
-8.3
6.2

3.1
3.9
1.8
4.2

0.8
0.6
-1.3
2.8

2.6
6.3
0.1
4.2

2.6
4.8
1.0
3.6

2.3
4.8
1.2
2.7

Inflation (consumer price index)

25.8

21.4

13.6

24.7

15.4

11.4

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

11.8
4.6

10.4
5.9

4.2
2.3

3.4
2.1

1.1
1.3

-0.2
1.0

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

4.0
24.7
87.9
9.5

1.0
25.6
69.5
5.4

-1.7
20.0
87.2
3.5

-2.8
18.7
74.5
3.0

-2.4
17.5
69.2
2.9

-3.2
16.8
67.0
2.4

35.2
57.6
81.2

35.2
57.7
81.3

36.0
58.3
81.7

36.1
58.4
81.8

35.2
57.6
81.2

34.3
56.9
80.7

-1.9
12.6

-0.8
12.2

-0.4
12.0-0.2
11.80.0
11.8

0.0
11.8

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2018-IDREA. Projection using neutral distribution (2018) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU.
b/ Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026.

MPO2Apr 24