Primary Dependency - Focus on Angola | tutor2u Economics

The Angolan economy is hugely dependent on the extraction and exporting of crude oil. With with global prices remaining stubbornly low their economy is suffering from a steep decline in export revenues and tax receipts.

  • Angola's civil war ended in 2022 but institutions still weak
  • President dos Santos (72) has been in power since 1979
  • The oil sector accounts for 95% of exports and 75% of tax revenues

Falling oil prices having significant effect on Angolan economy:

  1. Real GDP growth rate declining to 3%, per capita incomes declining
  2. Fiscal deficit has increased to 7% of GDP, government cutting fuel subsidies
  3. 40% of government debt is denominated in foreign currencies - Angolan kwanza has fallen by 18% in the last year
  4. Collapse in the exchange rate has caused inflation to jump over 20%
  5. Policy interest rates now 15%, central bank has devalued exchange rate 3 times since June 2015

Angola’s sovereign wealth fund is worth around $5bn (around 2.5% of GDP)

Government seeking financial help from China and also from the IMF. In the past, the default position of the IMF has been to apply conditionality to loan finance - for example requiring structural economic reforms and/or fiscal austerity. But there are signs that the IMF approach is changing.

Angola's export base is narrow and their economy is highly vulnerable to global economic shocks. According to economists at Rabobank, oil accounts for 98% of exports, around 80% of government revenue and 34% of GDP. Angola is therefore highly susceptible to volatility on the world oil market.

The country is ranked 148th/188 in the Human Development Index but scores even more poorly on ease of doing business - it is ranked 179th out of 183 countries according to the World Economic Forum.

Angola is the 54th largest export economy in the world and the 117th most complex economy according to the Economic Complexity Index (ECI)

Given the effect of low oil prices on the oil sector, Angola’s GDP growth is currently subdued. Medium-term growth prospects, however, are strong, at above 5%.

Deutsche Bank Research, Frontier Report, April 2015
Angola seeks to diversify its oil dependent economy

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