Angola Economy Facts
Angola is Africa’s third largest economy (after Nigeria and South Africa) and the continent’s second largest oil producer (after Nigeria). The extensive oil recovery is behind the record-breaking growth of the previously war-torn country since the end of the war in 2002. Nowadays, crude oil accounts for almost all of Angola’s export income and for almost three-quarters of the state’s revenue.
However, the country’s huge oil dependency led to major problems when the world market price of oil began to fall in the summer of 2014. Just over a year later, the price of oil had more than halved. As a result, the government has been forced to cut sharply in the state budget.
- Countryaah.com: Major imports by Angola, covering a full list of top products imported by the country and trade value for each product category.
While oil extraction, along with diamond mining (see Natural Resources and Energy), is of the utmost importance to Angola’s economy, eight of ten Angolans still rely on cultivation for their own use on small farms. The lucrative oil industry, like the diamond trade, creates extremely few jobs for the residents. Only one percent of the working population is active in these two sectors. In addition, widespread corruption in the oil industry and the diamond industry leads to a disappearing small share of the income for the population. Instead, the money stays in the pockets of the political and economic elites.
Small-scale agriculture is outdated and neglected, and it is periodically affected by drought, no later than 2015. Extensive famine disasters have been largely avoided thanks to international food aid – both during the 1975–2002 war and later. The oil money has made Angola import most of all food at high prices, which has mainly benefited the well-off.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including AGO which represents the country of Angola. Check findjobdescriptions to learn more about Angola.
The oil crisis since the summer of 2014 shows the great need to broaden Angola’s economy. Transport, light industry, trade and other services are growing, even if it is from a low level.
Economic development is hampered by corruption as well as by extensive bureaucracy, inadequate infrastructure and a poorly educated workforce. The government’s national industrialization plan for 2013–2017 includes investments in special economic zones, tax relief and increased opportunities for credit for small and medium-sized enterprises.
The war destroyed the economy
During the colonial era, the economy of the Portuguese colony was diverse and thriving, but it was destroyed for nearly three decades by civil war. The country’s infrastructure, such as bridges and roads, was destroyed and lots of hospitals and schools were demolished. In addition, the educated elite – the Portuguese – left the country at independence in 1975 and brought most of the value (see Modern history). Until the mid-1980s, the Soviet-inspired regime controlled all economic activity and resources were distributed through arbitrary political decisions. The country lacked a central bank until the early 1990s, and the state budget was usually exceeded shortly after it was submitted. The Ministry of Finance lacked control over all income and expenditure, as many financial decisions were made (and often still are today) in the presidential palace.
As the money lost its value, the country was moving more and more towards a clean exchange economy. In the early 1990s, half-hearted attempts were made to reform the economy, but with very limited results. When the war resumed in 1992, many of the goals had to be abandoned. New money was printed in ever-increasing numbers to cover a growing budget deficit, and inflation soared, with a record-breaking above 5,000 percent in 1996; at the turn of the millennium, it was at 325 percent.
After the 1994 peace agreement, Angola experienced some years of growth, about 8.5 percent a year – admittedly from a very low level. In 1999, when the civil war raged again, the World Bank threatened to no longer pay out loans to Angola unless the government took drastic measures, including against the corruption. After a currency reform was implemented and freer import rules were introduced, the International Monetary Fund (IMF) was able to launch a monitoring program in 2000, but the fund soon found that the regime did not do enough to fight corruption, and the program was canceled the following year.
In the years following the end of the war in 2002, contacts with the IMF were often marked by irritation and they were completely broken in 2007, when Angola’s oil income reached peak prices. However, the country had difficulty attracting foreign investment outside the oil and diamond industry, and aid for reconstruction was delayed. The regime instead borrowed money that would be repaid with future oil deliveries, which was costly and risky. The loans contributed to a growing foreign debt.
Oil tree in Luanda
In 2009, Angola was threatened by an acute budget crisis in the wake of the international financial crisis and drastically falling oil prices. The government was forced to turn to the IMF again and was granted a loan of US $ 1.4 billion until 2012. At the same time, the IMF requested economic reforms to get the private sector developing.
Since 2012, Angola has a government investment fund, which mainly consists of surplus from oil exports. The fund will protect the country’s economy from severe cyclical fluctuations and, above all, sudden race for oil prices. Funds will be used to develop agriculture, electricity and water supply as well as the transport sector to promote foreign investment in infrastructure.
Growth in the economy during the 2000s has been rapid but also varied with the state of the world economy and the price of oil. During the three years following the 2002 peace agreement, the economy grew by an average of almost 12 percent per year. GDP growth in 2007 was record high, over 23 percent, to then collapse and fall below 2 percent in 2010. Four years later, it had risen to 4.5 percent, but with falling world market prices for oil thereafter, growth was expected to decline again.
The high oil revenues and loans and investments from mainly China (see below) have in recent years set a track especially in the capital Luanda. Intensive construction has been ongoing there, with luxury hotels, improved roads and new suburbs, as well as a nationwide state network of major shopping malls and modern markets.
Poor insight into the regime’s business
The previously soaring inflation had been pushed down in 2006, but this was mainly due to the central bank selling large amounts of dollars to support the local currency, kwanza. Rising fuel prices drove inflation up again in 2010, while the four years later had turned down again.
In 2010, Angola received foreign credit ratings from credit rating agencies such as Moody’s, Standard & Poor’s and Fitch for the first time. This created new conditions for the country to borrow in the international market after Angola had China as the dominant lender. In June 2015, however, President dos Santos signed a new multi-billion dollar loan agreement with China. China has loaned Angola around $ 20 billion since 2002, and the loans have often been repaid in the form of oil or cash to one of the many Chinese companies operating in Angola.
The lack of transparency in the government’s business has remained a problem for Angola and makes data on the overall economy uncertain. The administration has been ineffective, the corruption widespread and the informal sector of the economy has grown. The tax system needs reform. Payment problems in 2008–2009 led to the IMF from 2011 tried to control budget management with quarterly funding plans for each department, so that only available resources were used; In August 2015, the IMF initiated an evaluation of the measures and how Angola coped with the reduced oil revenues.
FACTS – FINANCE
GDP per person
US $ 3,432 (2018)
US $ 105,751 million (2018)
-2.1 percent (2018)
Agriculture’s share of GDP
10.0 percent (2017)
Manufacturing industry’s share of GDP
6.6 percent (2017)
The service sector’s share of GDP
46.8 percent (2017)
17.2 percent (2019)
Government debt’s share of GDP
89.0 percent (2018)
US $ 37 201 million (2017)
Assistance per person
$ 7 (2017)