Angola’s Economic Recovery Hindered by Double Shock

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The Executive Board of the International Monetary Fund (IMF) stated that Angola’s economic growth is estimated at 0.5 percent for 2023, with a projected contraction in the oil sector of 6.1 percent and softened non-oil growth at 2.9 percent. Inflation increased significantly to 20.0 percent year-on-year at the end of December 2023, driven by the depreciation of the kwanza and cuts in fuel subsidy in mid-2023.

To respond to the shock, the authorities tightened their fiscal stance in the second half of 2023 by cutting capital spending and related goods and services and implementing the first phase of their fuel subsidy reform in June 2023. The policy measures resulted in overall and non-oil primary fiscal balances of -0.1 percent of GDP and -6.3 percent of GDP, respectively.

IMF directors emphasized the 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. They stressed the importance of sound implementation of fiscal structural reforms to enhance budget credibility and contingency planning, strengthen revenue mobilization, expenditure prioritization, and debt management. Additionally, they urged the authorities to maintain a tight monetary policy stance to contain exchange rate and inflationary pressures, strengthen financial stability, and continue efforts to transition towards an inflation-targeting framework. Priorities should focus on enhancing human capital, improving the business environment and access to finance, strengthening climate adaptation and resilience, and sustaining efforts to address issues related to AML/CFT, governance, and corruption.