Angola's Economic Outlook: Examining Its Gdp

Angola's GDP is heavily influenced by oil exports, which have brought volatile growth and high levels of poverty and inequality. Angola's GDP in 2022 was USD 115.9 billion, with an average growth rate of 0.5% in the decade running up to that year. In 2023, economic growth was revised down to 0.8%, and the country's GDP is expected to increase for the fifth consecutive year in 2029, reaching USD 114.98 billion.

Angola's GDP growth sectors

Angola's economy is heavily reliant on its oil sector, which has historically been the main driver of its GDP growth. However, the country has also identified other key sectors to support economic growth and reduce its dependence on oil. Here is a closer look at the main sectors contributing to Angola's GDP growth:

Oil and Gas

The oil sector is the dominant sector in Angola's economy, contributing about 50% of GDP, more than 70% of government revenue, and over 90% of exports. Angola is a member of the Organization of Petroleum Exporting Countries (OPEC) and has significant oil production levels, currently at around 1.16 million barrels per day. The country also holds substantial proven gas reserves. The oil and gas sector attracts major international companies such as Chevron, ExxonMobil, BP, and Total.

Agriculture

Agriculture, particularly subsistence agriculture, is a vital sector in Angola, providing the main livelihood for about 85% of the population. However, due to the civil war and landmine planting, agricultural activities have been disrupted, and Angola now imports nearly all its food. The government is working to revitalise the agricultural sector and has implemented projects like the Angola Commercial Agriculture Development Project to support the transition to a more market-oriented and competitive agriculture sector. Angola has abundant arable land and favourable climatic conditions, making agriculture a key sector for economic diversification.

Fisheries

The fisheries sector in Angola has shown promising growth, contributing to the country's non-oil sector expansion. Fisheries grew by almost 4% in 2022, and the government is investing in infrastructure and capacity building to further develop this sector.

Construction

The construction industry in Angola is benefiting from the growing economy and government-stimulated housing projects. The government has initiated various housing development programmes, such as the Angola Investe program and the Casa Feliz project, to address the need for housing infrastructure in the country.

Diamonds and Minerals

Angola is the third-largest producer of diamonds in Africa, and diamonds account for about 5% of the country's exports. However, the diamond industry has faced challenges due to corruption, human rights violations, and diamond smuggling. Nonetheless, the government is working to attract foreign investment in this sector and improve its production and export capacity.

Services

The services sector in Angola has shown resilience, recovering to pre-COVID-19 levels. This sector includes essential areas such as health, education, and financial services, which are crucial for the overall development of the country.

Angola's GDP composition by sector

Angola's economy is heavily reliant on the oil sector, which has historically been the main driver of its GDP. However, the country is attempting to diversify its economy and reduce its dependence on oil. Here is an overview of Angola's GDP composition by sector:

Oil and Gas Sector

The oil and gas industry is the dominant sector in Angola's economy, contributing about one-third to one-half of the country's GDP. As the second-largest oil producer in Africa, Angola's economic growth is influenced by fluctuations in oil production and prices. Oil exports account for more than 90% of the country's total exports, with crude oil and natural gas being the primary export commodities. In recent years, Angola's oil production has been declining, and the sector faces the challenge of reversing this stagnant production trend.

Service Sector

The service sector, particularly wholesale and retail trade, is another important contributor to Angola's GDP. In the third quarter of 2021, wholesale and retail trade added 17.4% to the country's GDP. This sector, along with fishery and mining, presented the strongest performance among all Angolan economic sectors during that period.

Agriculture, Forestry, and Fishing

Agriculture, forestry, and fishing are also significant components of Angola's GDP. While subsistence agriculture provides the main livelihood for about a third of the population, the overall contribution of this sector to GDP is relatively smaller compared to oil and services. Angola produces a range of agricultural products, including bananas, sugarcane, coffee, sisal, corn, cotton, and cassava.

Other Sectors

Other sectors that contribute to Angola's GDP include real estate, manufacturing, transportation, electricity, financial services, and public administration. However, their individual contributions are generally smaller compared to the oil, service, and agriculture sectors.

Angola is working to reduce its dependence on the oil sector and promote economic diversification. The country has abundant agricultural and arable land, and developing the agricultural sector is seen as a key strategy for achieving economic diversification, along with investments in other sectors such as fisheries, mining, and renewable energy.

Angola's GDP compared to global GDP

Angola's GDP is heavily influenced by the effects of four decades of conflict in the late 20th century, namely the war for independence from Portugal and the subsequent civil war. The economy is largely dependent on the oil sector, which has historically contributed to strong economic growth. However, with the end of the oil boom, Angola entered a period of economic contraction from 2015 onwards.

Angola's GDP is expected to continuously increase between 2024 and 2029, reaching 114.98 billion U.S. dollars in 2029. This forecast represents a total increase of 22.9 billion U.S. dollars (+24.86 percent) over the five-year period. Angola's economic growth is projected to be driven by non-oil sectors, as oil production faces long-term decline due to depletion and lack of investment.

In comparison, the global GDP amounted to over 100 trillion U.S. dollars as of 2022. The United States has the largest economy in the world, with a GDP of 25 trillion U.S. dollars in 2022, accounting for about a quarter of the global GDP. China is the second-largest economy, followed by Japan and Germany. Advanced economies had a combined GDP of nearly 58 trillion U.S. dollars in 2022, while emerging and developing countries accounted for approximately 43 trillion dollars.

Angola's GDP, while showing positive growth trends, is a small fraction of the global GDP. The country's economic performance is heavily reliant on the oil sector, making it vulnerable to external shocks and undermining macroeconomic stability. Angola's share in global GDP, adjusted for purchasing power parity (PPP), highlights its relatively small contribution to the world economy.

To achieve economic diversification and support growth, Angola needs to invest in sectors like agriculture, which has the potential to drive this diversification due to its abundant arable land and favorable climatic conditions.

Angola's GDP and oil production

The country's oil sector has been influenced by the effects of four decades of conflict in the late 20th century, including the war for independence from Portugal and the subsequent civil war. Despite these challenges, Angola's economy was one of the fastest-growing in the world during the first decade of the 21st century. High international oil prices and rising oil production contributed to strong economic growth during this period.

However, Angola's dependence on the oil sector has made it vulnerable to external shocks and undermined its macroeconomic stability. The country needs to diversify its economy and invest in other sectors, such as agriculture, to achieve long-term economic growth.

In recent years, Angola has experienced a period of economic contraction due to the end of the oil boom. Economic growth in 2023 was revised down to 0.8%, partly due to lower-than-expected oil exports. The non-oil sector also slowed, and the economy is not generating enough jobs to keep up with the growing working-age population.

Despite these challenges, Angola's GDP is expected to increase in the coming years. Between 2024 and 2029, the GDP is forecast to continuously increase by a total of $22.9 billion, reaching $114.98 billion in 2029. This growth will be driven by non-oil sectors, as the oil industry faces long-term decline due to oil depletion and a lack of investment.

Angola's GDP and non-oil sectors

Angola's GDP is heavily reliant on its oil sector, which has historically contributed to strong economic growth. However, the country has recognised the need to diversify its economy and reduce its dependence on oil, especially in the face of global decarbonisation efforts. As a result, Angola is now focusing on developing its non-oil sectors, particularly agriculture, to drive economic growth and create jobs.

Oil Sector Dominance

Angola's economy is heavily dependent on its oil sector, which has been the main driver of economic growth. Oil production and supporting activities contribute about 50% of GDP, over 60% of government revenue, and more than 90% of exports. This has made Angola's economy vulnerable to fluctuations in global oil demand and prices, leading to volatile growth and high levels of poverty and inequality.

Challenges and Diversification Efforts

The oil sector's dominance has also stunted the development of non-oil sectors and limited economic diversification and job creation. Angola has a growing working-age population, but the economy is not generating enough jobs to keep up with the demand. As a result, unemployment remains high, particularly among youth.

Recognising these challenges, Angola has been working to diversify its economy and reduce its dependence on the oil sector. The country has implemented reforms to improve macroeconomic management and public sector governance, and has enhanced macroeconomic stability through a more flexible exchange rate regime, central bank autonomy, sound monetary policy, and fiscal consolidation.

Non-Oil Sectors

The non-oil sectors that Angola is focusing on include agriculture, energy, and social protection. With its abundant agricultural and arable land and favourable climatic conditions, agriculture is seen as the sector with the highest potential to drive diversification. Angola has a variety of agricultural products, including bananas, sugarcane, coffee, sisal, corn, cotton, cassava, and tobacco. However, half of the country's food is still imported, highlighting the need for further development in this sector.

The energy sector is also a key focus, with technical assistance being provided to improve energy infrastructure and services. Additionally, Angola has been working to strengthen its social protection programs to improve the quality of life of its citizens and equip them to play a greater role in the country's development.

Outlook

While Angola's economy is expected to rebound and grow, driven by these non-oil sectors, the country still faces challenges. The oil sector is in structural decline due to oil depletion and lack of investment. Additionally, Angola needs to urgently invest in removing barriers to private sector investment to achieve the desired level of economic diversification.

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