IMF Executive Board Concludes 2023 Article IV Consultation with Angola
IMF News, March 9, 2024
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- Published: March 9, 2024
Key macroeconomic assessment and 2023 developments
- Growth is estimated at 0.5 percent for 2023.
- Oil sector contracted an estimated 6.1 percent in 2023.
- Non-oil growth softened to 2.9 percent in 2023.
- Headline inflation increased to 20.0 percent y/y at end-December 2023, driven by the depreciation of the kwanza and cuts in fuel subsidy in mid-2023.
- Authorities tightened fiscal stance in the second half of 2023 by cutting capital spending and related goods and services, and implementing the first phase of fuel subsidy reform in June 2023.
- Overall and non-oil primary fiscal balances were -0.1 percent of GDP and -6.3 percent of GDP, respectively, in 2023.
- Public debt-to-GDP is projected to have increased by 19 p.p. to about 84 percent of GDP in 2023, mainly driven by a significantly weaker exchange rate.
- International reserves remained at about 7 months of import coverage in 2023; the depreciation of the kwanza in June 2023 helped preserve reserves and the exchange rate has remained broadly stable since then.
Near-term outlook and risks
- Real GDP growth is projected to recover in the near-term, supported by improved oil production and recovery in the non-oil sector.
- Inflation is expected to remain temporarily elevated in 2024 and to gradually decline thereafter as subsidy removal effects and pass-through from nominal exchange rate depreciation diminish.
- The primary fiscal balance is expected to improve and remain positive given:
- expected continuation of fuel subsidy reform;
- lower debt service starting in 2024;
- expected recovery in growth.
- Downside risks:
- larger-than-expected decline in global oil prices and/or domestic oil production;
- delayed implementation of the fuel subsidy reform.
- Upside risk: higher-than-expected oil prices.
Executive Board assessment and policy guidance
- Directors agreed with the thrust of the staff appraisal, recognizing the near halt of Angola’s recovery in 2023 and high risks including dependence on oil, debt and banking sector vulnerabilities, and uncertain market access.
- Emphasized need for continued fiscal consolidation and structural reforms, supported by technical assistance from the Fund and other development partners, to maintain macroeconomic stability and foster diversified, resilient, and inclusive growth.
- Fiscal policy recommendations:
- Continue fiscal consolidation to strengthen fiscal and public debt sustainability.
- Implement fuel subsidy reductions in the 2024 budget with sound implementation, timely and effective communication, and well‑targeted mitigation measures.
- Accelerate fiscal structural reforms to enhance budget credibility and contingency planning, strengthen revenue mobilization, expenditure prioritization, and debt management.
- Monetary and exchange rate recommendations:
- Maintain a tight monetary policy stance to contain exchange rate and inflationary pressures.
- Further strengthen monetary policy implementation framework to enhance monetary policy transmission, including improving liquidity management, central bank communications, and coordination with the Ministry of Finance.
- Continue efforts to transition towards an inflation‑targeting framework, improve FX market functioning, develop rule‑based FXI policy under the IMF’s Integrated Policy Framework, and ensure exchange rate flexibility as a key buffer against shocks.
- Financial sector recommendations:
- Continue efforts to strengthen financial stability, implement new supervisory regulations, and operationalize the bank resolution framework.
- Increase financial intermediation and credit to the private sector.
- Structural and development priorities:
- Successful implementation of the National Development Plan to achieve more diversified and resilient growth.
- Priorities: enhancing human capital (notably reductions in gender gaps) backed by effective social and public investment spending; improving the business environment and access to finance; strengthening climate adaptation and resilience; sustaining efforts to address AML/CFT, governance, and corruption.
- Directors noted that efforts on all these fronts are macro‑critical for Angola.
Selected economic indicators (highlights from Angola: Selected Economic Indicators, 2022-24)
- Real gross domestic product: 3.0 (2022), 0.5 (2023), 2.6 (2024).
- Oil sector (real percent change): -6.1 (2022), 1.2 (2023), (2024 listed as non-oil sector 2.9 and projections follow).
- Non-oil sector (real percent change): 4.2 (2022), 2.9 (2023).
- Nominal gross domestic product (GDP): 20.1 (2022), 13.9 (2023), 27.7 (2024).
- GDP deflator: 16.5 (2022), 13.4 (2023), 24.5 (2024).
- Consumer prices (end of period): 13.8 (2022), 20.0 (2023), 18.0 (2024).
- Gross domestic product (billions of kwanzas): 56,769 (2022), 64,678 (2023), 82,591 (2024).
- Gross domestic product (billions of U.S. dollars): 122.8 (2022), 94.4 (2023), 92.4 (2024).
- Gross domestic product per capita (U.S. dollars): 3,439 (2022), 2,566 (2023), 2,438 (2024).
- Central government total revenue (percent of GDP): 23.2 (2022), 20.8 (2023).
- Of which: Oil-related: 12.1 (2022), 12.8 (2023).
- Of which: Non-oil tax: 7.9 (2022), 6.7 (2023).
- Central government total expenditure (percent of GDP): 22.5 (2022), 18.2 (2023).
- Current expenditure: 16.4 (2022), 15.2 (2023).
- Capital spending: 6.1 (2022), 3.8 (2023).
- Overall fiscal balance (percent of GDP): 0.7 (2022), -0.1 (2023).
- Non-oil primary fiscal balance (percent of GDP): -8.5 (2022), -6.3 (2023), -4.5 (2024).
- Broad money (M2, end of period, percent change): -1.4 (2022), 23.8 (2023), 19.1 (2024).
- Credit to the private sector (annual percent change): -4.8 (2022), 12.7 (2023).
- Trade balance (percent of GDP): 26.7 (2022), 23.4 (2023), 25.1 (2024).
- Exports of goods, f.o.b. (percent of GDP): 40.7 (2022), 38.2 (2023), 39.6 (2024).
- Of which: Oil and gas exports (percent of GDP): 38.7 (2022), 35.4 (2023), 36.5 (2024).
- Imports of goods, f.o.b. (percent of GDP): 14.1 (2022), 14.8 (2023), 14.6 (2024).
- Current account balance (percent of GDP): 9.6 (2022), 3.1 (2023).
- Gross international reserves (end of period, millions of U.S. dollars): 14,661 (2022), 14,733 (2023), 15,141 (2024).
- Gross international reserves (months of next year's imports): 7.3 (2022), 7.6 (2023).
- Public sector debt (gross, percent of GDP): 64.8 (2022), 84.5 (2023), 69.5 (2024).
- Of which: Central Government debt: 60.5 (2022), 78.1 (2023), 65.6 (2024).
- Oil and gas production (millions of barrels per day): 1.250 (2022), 1.205 (2023), 1.241 (2024).
- Oil and gas exports (billions of U.S. dollars): 47.5 (2022), 33.4 (2023), 33.7 (2024).
- Angola oil price (average, U.S. dollars per barrel): 100.3 (2022), 81.0 (2023), 78.7 (2024).
- Brent oil price (average, U.S. dollars per barrel): 99.0 (2022), 82.7 (2023), 80.1 (2024).
IMF Executive Board press release, March 8, 2024.
