Figure 1: Current Account Balance in Angola (2016-2022)
Sources: IMF 2019, Angola Second Review of the Extended Arrangement Under the Extended Fund Facility; IMF 2018, Angola Request for An Extended Arrangement Under the Extended Fund Facility. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
Total merchandise imports to Angola moderated to USD 15.4 billion in 2018, from an annual average of USD 16.1 billion for 2015 to 2017[1]. Exports increased significant to USD 42.0 billion in 2018 from an annual average of USD 31.7 billion for 2015 to 2017[2]. The stronger growth in exports has assisted to recover Angola’s current account balance from an average of USD 704.7 million (approx. 0.4% of GDP) for 2016 to 2018, to a surplus of USD 2.9 billion (approx. 2.5% of GDP) in 2019[3]. The growth in export earnings has improved Angola’s current account and balance of payments but has not been sufficient to curb the deterioration of gross official reserves due to the persistent balance of payments deficit.
Figure 2: Capital and Financial Account Balance in Angola (2016-2022)
Sources: IMF 2019, Angola Second Review of the Extended Arrangement Under the Extended Fund Facility; IMF 2018, Angola Request for An Extended Arrangement Under the Extended Fund Facility. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
Angola’s capital and financial account balance deteriorated slightly from an average of USD 5.7 billion (approx. 4.9% of GDP) for 2016 to 2018, to a surplus (net inflows) of USD 5.3 billion (approx. 4.5% of GDP) in 2019. The balance of payments deficit narrowed from a deficit averaging -USD 5.0 billion for 2016 to 2018, to -USD 2.4 billion in 2019. Hence, Angola’s gross official reserves decreased from USD 24.4 billion in 2016 to USD 16.2 billion in 2018, before continuing to decline to USD 15.5 billion in 2019[4]. During this period, Angola experienced significant inward and outward FDI flows.
Figure 3: Gross Official Reserves and Balance of Payment in Angola (2016-2022)
Sources: IMF 2019, Angola Second Review of the Extended Arrangement Under the Extended Fund Facility; IMF 2018, Angola Request for An Extended Arrangement Under the Extended Fund Facility. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
Inward FDI flows deteriorated from net inflows of USD 10.0 billion in 2015 to net outflows of -USD 7.4 billion in 2017, before improving slightly to FDI outflows of -USD 5.7 billion in 2018[5]. As a result, Angola’s inward FDI stock decreased from an average of USD 30.3 billion for 2015 to 2017, to USD 23.7 billion in 2018[6]. In addition, Angolans increased their investments abroad as inward FDI exited the country.
Figure 4: Inward Foreign Direct Investment in Angola (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Outward FDI flows improved from net repatriations of -USD 784.9 million in 2015 to net outflows of USD 1.4 billion in 2017, before deteriorating to FDI outflows of USD 3.3 million in 2018[7]. As a result, Angola’s outward FDI stock increased from an average of USD 4.7 billion for 2015 to 2017, to USD 5.1 billion in 2018[8]. Although these capital outflows have been adverse for Angola’s balance of payment, they have improved the country’s net international FDI position.
Figure 5: Outward Foreign Direct Investment from Angola (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Angola’s balance of payment has been deteriorated by significant inward FDI outflows as significant capital exited the country from 2016 to 2018. However, the capital outflows and outward FDI outflows have improved Angola’s net international FDI position. Angola’s net international FDI position improved from net liabilities amounting to an average of -USD 26.2 billion (approx. -23.4% of GDP) for 2015 to 2017, to net liabilities amounting to USD 12.8 billion (approx. -12.1% of GDP) in 2018[9].
Figure 6: International Foreign Direct Investment Position in Angola (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
At these levels Angola’s foreign liabilities remain sustainable as a proportion of GDP and the economy has room to increase its inward FDI inflows. Given the relatively narrow domestic capital markets and the persistent balance of payments deficit, Angola should focus on attracting inward FDI inflows in sectors that will increase productive capacity and diversify its exports because the country is still heavily dependent on crude oil exports. Nevertheless, Angola’s balance of payments deficit is projected to narrow before recovering to a small surplus in 2022. This is projected to support a recovery in gross official reserves in the medium-term.
Reduced inward FDI outflows and the narrowing, yet persistent, current account surplus should improve Angola’s balance of payments in the forward-looking medium-term. The current account balance is projected to deteriorate from a surplus of USD 2.9 billion in 2019 to a surplus averaging USD 384.3 billion (approx. 0.5% of GDP) from 2020 to 2022[10]. Angola’s capital and financial account balance is projected to improve to a surplus in 2022 but it will remain as a deficit (net outflows) averaging -USD 949.3 million (approx. -1.2% of GDP) for 2020 to 2022[11]. Therefore, the balance of payment is projected to recover from a deficit of -USD 1.3 billion in 2020 to a surplus of USD 1.2 billion in 2022, which is equivalent to an average deficit of -USD 559.7 million (approx. -0.1% of GDP)[12]. Thus, Angola’s gross official reserves are projected to increase from USD 15.5 billion in 2019 to an average of USD 18.5 billion from 2020 to 2022[13].
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 8 March 2020].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] IMF 2019. Angola Second Review of the Extended Arrangement Under the Extended Fund Facility, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020]; IMF 2018. Angola Request for An Extended Arrangement Under the Extended Fund Facility, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020].
[4] IMF 2019. Angola Second Review of the Extended Arrangement Under the Extended Fund Facility, ibid.; IMF 2018. Angola Request for An Extended Arrangement Under the Extended Fund Facility, ibid.
[5] UNCTAD 2019. UNCTADStat Database, ibid.
[6] UNCTAD 2019. UNCTADStat Database, ibid.
[7] UNCTAD 2019. UNCTADStat Database, ibid.
[8] UNCTAD 2019. UNCTADStat Database, ibid.
[9] UNCTAD 2019. UNCTADStat Database, ibid.
[10] IMF 2019. Angola Second Review of the Extended Arrangement Under the Extended Fund Facility, ibid.
[11] IMF 2019. Angola Second Review of the Extended Arrangement Under the Extended Fund Facility, ibid.
[12] IMF 2019. Angola Second Review of the Extended Arrangement Under the Extended Fund Facility, ibid.
[13] IMF 2019. Angola Second Review of the Extended Arrangement Under the Extended Fund Facility, ibid.
