Press Release: IMF Executive Board Concludes 2014 Article IV Consultation with Angola

September 3, 2014

Press Release No. 14/410
September 3, 2014

On August, 29, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Angola.

After a strong growth in 2013 estimated at 6.8 percent, economic growth in 2014 is projected at 3.9 percent despite a decline in oil output. Robust growth in the nonoil economy, mainly driven by a very good performance in the agricultural sector, is expected to offset a temporary but considerable drop in oil production.2 Ongoing investments in agriculture are expected to pay off with an increase in agriculture production by about 11½ percent in 2014. Other sectors such as manufacturing, electricity and services, are also expected to contribute. Inflation projected to reach 7½ percent by end-2014 is well within the Banco Nacional de Angola (BNA)’s objective. The overall fiscal balance, which was in surplus in the last four years, is expected to deteriorate substantially in 2014, reaching a deficit of around 4 percent of GDP. Oil revenue fell by 14 percent during January-May 2014, mainly due to a 10 percent decline in oil production related to unscheduled maintenance and repair work in some oil fields. International reserves at the BNA remain adequate at an equivalent of 7¾ months of imports.

Notwithstanding strong economic growth over the past decade, poverty and income inequality remain a challenge. The 2009 household expenditure survey, released in 2011, shows that Angola’s income distribution is among the most unequal in sub-Saharan Africa, with the top 10 percent of income earners concentrating one-third of total income, and puts the relative poverty headcount ratio in Angola at 37 percent (60 percent in rural areas).

Progress in structural reforms has been strong. The long-awaited non-oil tax reform was approved by the National Assembly on July 4, 2014, which is a crucial step toward reducing the budget’s heavy reliance on oil revenue. Public financial management (PFM) reforms also made headways with the introduction of two critical measures to control the proliferation of domestic expenditure arrears: (i) the budget framework law now includes a clear definition of arrears consistent with international best practice; and (ii) a new control procedure requires the confirmation by the Finance Ministry of all contracts above US$1.5 million. The Economy Ministry has also continued with the implementation of a number of measures aimed at improving the business environment, including the Angola Invest program.

The medium-term economic growth prospects remain favorable. The oil sector is expected to recover and grow by 2¼ percent on average over the next five years, as the decline in production in some oil fields is more than compensated by the commissioning of seven new fields, including a first phase of a pre-salt oil field expected to start operating in 2017. Large investments in the nonoil sector are expected to generate much needed diversification and job creation, mainly in the agricultural sector, but also in electricity, manufacturing, and services. The projected strong growth in the nonoil sector of about 7¾ percent on average over the next five years is also expected to increase domestic competition, thus contributing to reducing inflation further. Growth prospects over the longer term, however, are uncertain but should be firmed up during 2015, as ongoing pre-salt prospection should help to determine the amount of commercially viable oil reserves.

Executive Board Assessment3

Executive Directors agreed with the thrust of the staff appraisal and commended the authorities for the progress made toward macroeconomic stability, having reached a historically low level of inflation and an adequate level of international reserves. Directors welcomed the improved economic outlook, but noted that risks require additional efforts to strengthen policies. In the long run, reducing the dependence on oil is key to containing external vulnerabilities and achieving sustainable and inclusive growth.

Directors concurred on the need to preserve space for rebuilding infrastructure and reducing poverty and inequality, while saving part of the oil wealth for future generations. This requires addressing emerging fiscal deficits and returning to fiscal surpluses over the medium term, including by strengthening nonoil revenue administration, modernizing public sector wage policy, and gradually eliminating costly and regressive fuel subsidies while expanding well targeted social safety nets. Taking note of the recent partial tax amnesty, Directors encouraged the authorities to strictly enforce tax liabilities going forward to avoid any negative impact on tax collection.

Directors emphasized the need for a coherent asset liability management framework, including a fiscal stabilization fund that could improve the management of Angola’s natural resource wealth and protect annual budgets against volatile oil revenue. They noted the very low efficiency of public investment and saw merit in developing a system of public investment management that would help meet Angola’s infrastructure needs at a lower cost. They welcomed the recent measures to strengthen public financial management and end domestic payment arrears, and looked forward to their steadfast implementation.

Directors supported the authorities’ efforts to de dollarize the economy and strengthen financial stability, and underscored that effective and evenhanded implementation of prudential norms is necessary to foster trust in the banking system. In this regard, they welcomed the extraordinary measures taken to address the problems at Banco Espírito Santo Angola and the new legislation clarifying procedures for the granting of public guarantees, and encouraged actions to address the outstanding weaknesses in the Anti-Money Laundering/Combating Financing of Terrorism framework.

Directors saw the current conditions of relative stability and low inflation as an opportunity to introduce some exchange rate flexibility, which would help reduce dollarization and develop more effective monetary instruments. They noted that reserve levels are currently adequate and should be maintained to provide an appropriate buffer against external shocks.

Directors stressed that a sustainable reduction in poverty is best achieved through the development of small and medium size enterprises in the private, nonoil sector. They were encouraged by the authorities’ efforts to diversify the economy and improve the business environment and competiveness. They were concerned, however, by the increasing use of trade protection, and recommended a periodic review of the recently introduced import tariff schedule with a view to lowering tariffs within a specific timeframe.

Directors welcomed progress on the compilation and dissemination of economic statistics, and encouraged the authorities to address the remaining gaps in the production of more detailed and timely fiscal accounts and in the coverage of the balance of payments.


Angola: Main Economic Indicators, 2009–20151

 

 

2009

2010

2011

2012

 

2013

 

2014

2015

 

 

 

 

 

 

Prel.

 

Proj.

 

Real economy (percent change, except where noted)

Real gross domestic product

2.4

3.4

3.9

5.2

 

6.8

 

3.9

5.9

Oil sector

-5.1

-3.0

-5.4

4.5

 

-1.1

 

-3.5

2.6

Non-oil sector

8.1

7.6

9.5

5.5

 

10.8

 

7.3

7.3

                   

Nominal gross domestic product

-5.2

26.6

29.0

12.6

 

8.8

 

7.8

9.7

Oil sector

-25.4

27.6

36.7

8.4

 

-3.3

 

-1.1

2.6

Non-oil sector

21.1

25.7

22.8

16.4

 

19.0

 

13.9

13.9

                   

GDP deflator

-7.4

22.4

24.2

7.1

 

1.9

 

3.7

3.5

Non-oil GDP deflator

12.1

16.8

12.2

10.3

 

7.4

 

6.1

6.2

                   

Consumer prices (annual average)

13.7

14.5

13.5

10.3

 

8.8

 

7.3

7.3

Consumer prices (end of period)

14.0

15.3

11.4

9.0

 

7.7

 

7.4

7.2

                   

Gross domestic product (billions of kwanzas)

5,989

7,580

9,780

11,011

 

11,984

 

12,917

14,167

Oil gross domestic product (billions of kwanzas)

2,662

3,396

4,641

5,030

 

4,864

 

4,808

4,933

Non-oil gross domestic product (billions of kwanzas)

3,327

4,184

5,139

5,982

 

7,120

 

8,109

9,234

Gross domestic product (billions of U.S. dollars)

75.5

82.5

104.1

115.3

 

124.2

 

131.4

141.8

                   

Gross domestic product per capita (U.S. dollars)

4,081

4,329

5,305

5,706

 

5,964

 

6,128

6,418

                   

Central government (percent of GDP)

                 

Total revenue

34.5

43.5

48.8

45.9

 

41.0

 

36.8

37.0

Of which: Oil-related

24.2

33.0

39.0

37.3

 

30.0

 

26.5

26.5

Of which: Non-oil tax

9.0

7.8

7.3

6.6

 

8.1

 

8.2

8.6

Total expenditure

41.9

40.0

40.2

41.3

 

40.7

 

41.5

41.2

Current expenditure

29.5

28.6

30.0

29.0

 

28.7

 

29.5

29.2

Capital expenditure

12.4

11.4

10.2

12.3

 

12.0

 

12.0

11.9

Overall fiscal balance

-7.4

3.4

8.7

4.6

 

0.3

 

-4.8

-4.1

Non-oil primary fiscal balance

-29.8

-26.2

-26.9

-29.2

 

-27.5

 

-28.9

-27.9

Non-oil primary fiscal balance (Percent of non-oil GDP)

-53.7

-47.4

-51.1

-53.7

 

-46.2

 

-46.0

-42.8

                   

Money and credit (end of period, percent change)

                 

Broad money (M2)

62.6

14.0

33.5

8.4

 

15.3

 

21.4

19.8

Percent of GDP

38.5

34.6

35.9

34.5

 

36.5

 

41.1

44.9

Velocity (GDP/M2)

2.6

2.9

2.8

2.9

 

2.7

 

2.4

2.2

Velocity (non-oil GDP/M2)

1.4

1.6

1.5

1.6

 

1.6

 

1.5

1.5

Credit to the private sector (12-month percent change)

59.5

25.0

30.4

24.2

 

10.9

 

12.1

18.3

                   

Balance of payments

                 

Trade balance (percent of GDP)

24.2

40.1

45.2

40.7

 

33.6

 

29.6

26.1

Exports of goods, f.o.b. (percent of GDP)

54.2

60.4

64.6

61.3

 

54.8

 

50.4

47.2

Of which: Oil and gas exports (percent of GDP)

52.8

58.8

62.3

60.1

 

53.7

 

49.4

46.1

Imports of goods, f.o.b. (percent of GDP)

30.0

20.2

19.4

20.6

 

21.2

 

20.8

21.1

Terms of trade (percent change)

-28.8

16.7

23.3

7.9

 

-2.1

 

1.3

-0.5

Current account balance (percent of GDP)

-9.9

8.1

12.6

11.7

 

5.5

 

4.1

2.0

                   

Gross international reserves (end of period, millions of U.S. dollars)

13,238

19,339

28,396

33,035

 

33,179

 

33,908

35,137

Gross international reserves (months of next year's imports)

4.5

5.3

7.4

7.8

 

7.8

 

7.5

7.4

Net international reserves (end of period, millions of U.S. dollars)

12,514

16,848

26,083

30,632

 

30,987

 

32,474

34,088

                   

Exchange rate

                 

Official exchange rate (average, kwanzas per U.S. dollar)

79.3

91.9

93.9

95.5

 

96.5

 

Official exchange rate (end of period, kwanzas per U.S. dollar)

89.4

92.6

95.3

95.8

 

97.5

 

                   

Debt (percent of GDP)

                 

Total public sector debt (gross)

49.9

39.8

32.2

29.6

 

34.6

 

36.6

38.8

                   

Oil

                 

Oil production (millions of barrels per day)

1.809

1.758

1.660

1.735

 

1.716

 

1.656

1.700

Oil and gas exports (billions of U.S. dollars)

39.9

48.5

64.8

69.3

 

66.7

 

64.9

65.4

Angola oil price (average, U.S. dollars per barrel)

60.8

76.5

110.3

110.9

 

107.3

 

107.9

106.1

Brent oil price (average, U.S. dollars per barrel)

61.9

79.6

111.0

112.0

 

109.1

 

108.2

106.1

WEO oil price (average, U.S. dollars per barrel)

61.8

79.0

104.0

105.0

 

104.1

 

106.1

102.8

 

Sources: Angolan authorities and IMF staff estimates and projections

1 Incorporates the impact of the new foreign exchange law in 2013 and beyond.

               

Angola: Main Economic Indicators, 2009–20151

 

 

2009

2010

2011

2012

 

2013

 

2014

2015

 

 

 

 

 

 

Prel.

 

Proj.

 

Real economy (percent change, except where noted)

Real gross domestic product

2.4

3.4

3.9

5.2

 

6.8

 

3.9

5.9

Oil sector

-5.1

-3.0

-5.4

4.5

 

-1.1

 

-3.5

2.6

Non-oil sector

8.1

7.6

9.5

5.5

 

10.8

 

7.3

7.3

                   

Nominal gross domestic product

-5.2

26.6

29.0

12.6

 

8.8

 

7.8

9.7

Oil sector

-25.4

27.6

36.7

8.4

 

-3.3

 

-1.1

2.6

Non-oil sector

21.1

25.7

22.8

16.4

 

19.0

 

13.9

13.9

                   

GDP deflator

-7.4

22.4

24.2

7.1

 

1.9

 

3.7

3.5

Non-oil GDP deflator

12.1

16.8

12.2

10.3

 

7.4

 

6.1

6.2

                   

Consumer prices (annual average)

13.7

14.5

13.5

10.3

 

8.8

 

7.3

7.3

Consumer prices (end of period)

14.0

15.3

11.4

9.0

 

7.7

 

7.4

7.2

                   

Gross domestic product (billions of kwanzas)

5,989

7,580

9,780

11,011

 

11,984

 

12,917

14,167

Oil gross domestic product (billions of kwanzas)

2,662

3,396

4,641

5,030

 

4,864

 

4,808

4,933

Non-oil gross domestic product (billions of kwanzas)

3,327

4,184

5,139

5,982

 

7,120

 

8,109

9,234

Gross domestic product (billions of U.S. dollars)

75.5

82.5

104.1

115.3

 

124.2

 

131.4

141.8

                   

Gross domestic product per capita (U.S. dollars)

4,081

4,329

5,305

5,706

 

5,964

 

6,128

6,418

                   

Central government (percent of GDP)

                 

Total revenue

34.5

43.5

48.8

45.9

 

41.0

 

36.8

37.0

Of which: Oil-related

24.2

33.0

39.0

37.3

 

30.0

 

26.5

26.5

Of which: Non-oil tax

9.0

7.8

7.3

6.6

 

8.1

 

8.2

8.6

Total expenditure

41.9

40.0

40.2

41.3

 

40.7

 

41.5

41.2

Current expenditure

29.5

28.6

30.0

29.0

 

28.7

 

29.5

29.2

Capital expenditure

12.4

11.4

10.2

12.3

 

12.0

 

12.0

11.9

Overall fiscal balance

-7.4

3.4

8.7

4.6

 

0.3

 

-4.8

-4.1

Non-oil primary fiscal balance

-29.8

-26.2

-26.9

-29.2

 

-27.5

 

-28.9

-27.9

Non-oil primary fiscal balance (Percent of non-oil GDP)

-53.7

-47.4

-51.1

-53.7

 

-46.2

 

-46.0

-42.8

                   

Money and credit (end of period, percent change)

                 

Broad money (M2)

62.6

14.0

33.5

8.4

 

15.3

 

21.4

19.8

Percent of GDP

38.5

34.6

35.9

34.5

 

36.5

 

41.1

44.9

Velocity (GDP/M2)

2.6

2.9

2.8

2.9

 

2.7

 

2.4

2.2

Velocity (non-oil GDP/M2)

1.4

1.6

1.5

1.6

 

1.6

 

1.5

1.5

Credit to the private sector (12-month percent change)

59.5

25.0

30.4

24.2

 

10.9

 

12.1

18.3

                   

Balance of payments

                 

Trade balance (percent of GDP)

24.2

40.1

45.2

40.7

 

33.6

 

29.6

26.1

Exports of goods, f.o.b. (percent of GDP)

54.2

60.4

64.6

61.3

 

54.8

 

50.4

47.2

Of which: Oil and gas exports (percent of GDP)

52.8

58.8

62.3

60.1

 

53.7

 

49.4

46.1

Imports of goods, f.o.b. (percent of GDP)

30.0

20.2

19.4

20.6

 

21.2

 

20.8

21.1

Terms of trade (percent change)

-28.8

16.7

23.3

7.9

 

-2.1

 

1.3

-0.5

Current account balance (percent of GDP)

-9.9

8.1

12.6

11.7

 

5.5

 

4.1

2.0

                   

Gross international reserves (end of period, millions of U.S. dollars)

13,238

19,339

28,396

33,035

 

33,179

 

33,908

35,137

Gross international reserves (months of next year's imports)

4.5

5.3

7.4

7.8

 

7.8

 

7.5

7.4

Net international reserves (end of period, millions of U.S. dollars)

12,514

16,848

26,083

30,632

 

30,987

 

32,474

34,088

                   

Exchange rate

                 

Official exchange rate (average, kwanzas per U.S. dollar)

79.3

91.9

93.9

95.5

 

96.5

 

Official exchange rate (end of period, kwanzas per U.S. dollar)

89.4

92.6

95.3

95.8

 

97.5

 

                   

Debt (percent of GDP)

                 

Total public sector debt (gross)

49.9

39.8

32.2

29.6

 

34.6

 

36.6

38.8

                   

Oil

                 

Oil production (millions of barrels per day)

1.809

1.758

1.660

1.735

 

1.716

 

1.656

1.700

Oil and gas exports (billions of U.S. dollars)

39.9

48.5

64.8

69.3

 

66.7

 

64.9

65.4

Angola oil price (average, U.S. dollars per barrel)

60.8

76.5

110.3

110.9

 

107.3

 

107.9

106.1

Brent oil price (average, U.S. dollars per barrel)

61.9

79.6

111.0

112.0

 

109.1

 

108.2

106.1

WEO oil price (average, U.S. dollars per barrel)

61.8

79.0

104.0

105.0

 

104.1

 

106.1

102.8

 

Sources: Angolan authorities and IMF staff estimates and projections

1 Incorporates the impact of the new foreign exchange law in 2013 and beyond.

               

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 Calculations are based on the GDP series provided by the Planning Ministry and thus do not yet reflect the revised series as calculated by the National Statistics Institute (INE).

3 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing ups can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.




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