Angola’s exports have continued recovering from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports continued recovering from COVID-19 to USD 33.7 billion in 2021. Angola has an extremely concentrated export profile and earnings from crude oil have continued increasing to USD 28.8 billion (approx. 85.5% of total exports) in 2021. Other top exports from Angola include natural gas and natural abrasives (incl. industrial diamonds). These exports contributed USD 3.4 billion (approx. 10.0% of total exports). Angola’s export earnings from natural gas have continued increasing to USD 2.1 billion in 2021; and earnings from natural abrasives have continued increasing to USD 1.3 billion in the same period. Hence, Angola’s trade balance has continued increasing from an annual average of USD 11.8 billion for 2018 to 2020, to USD 13.7 billion in 2021.
Total merchandise export earnings have continued increasing which relieved the pressure caused by net FDI outflows (foreign capital being extracted from domestic market). Angola has had net FDI outflows that increased to USD 4.2 billion in 2021. Hence, Angola’s FDI stock has not recovered from COVID-19 and continue decreasing from an annual average of USD 19.7 billion for 2018 to 2020 to USD 13.2 billion in 2021. This does not bode well for Angola as a country that is aiming to attract more foreign investment to diversify its economy away from the reliance on crude oil exports. However, this could also signify the limited economic opportunities in sectors that have traditionally attracted foreign capital in the economy, which would signify some progress for the national economic diversification strategy.
Remittances receipts have grown significantly over the period. Personal remittances received have been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 4.4 million for 2018 to 2020 to USD 12.6 million in 2021. Personal remittance payments to foreign nationals have begun moderating since the COVID-19 pandemic from an annual average of USD 602.4 million for 2018 to 2020 to USD 445.4 million in 2021. Angola has had net remittance outflows (net remittance payment to foreign nationals) and remittance outflows decreased to USD 432.8 million in 2021. This has affected the current account balance and strength of the AOA over the period.
The AOA has continued depreciating. In nominal terms, the AOA depreciated by an annual average of -53.4% against the USD for 2018 to 2020. The AOA depreciated by -73.7% to an annual average of AOA 631.3 per USD in 2021. Angola’s current account balance seems to have begun recovering from COVID-19 and widened the surplus. In 2022, Angola’s current account balance has continue widening beyond its historical medium-term average. In particular, Angola has benefited from the higher crude oil prices which continued appreciating by 44.6% to USD 102.4 per bbl in 2022 due to lower global supply following the sanctions against Russian exports after its military exercises in Ukraine (2021: +63.5%; USD 70.8 per bbl). This is also reflected in the projections for Angola’s current account balance.
In 2023, Angola’s current account surplus is projected to narrow despite being above its historical medium-term average (USD 7.3 billion; approx. 5.4% of GDP). In the medium-term from 2024 to 2026, Angola’s current account surplus is projected to deteriorate in the short-term and in the projected medium-term period to an annual average of USD 2.5 billion (approx. 1.7% of GDP). This illustrates a short-lived improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia on global oil prices. Nevertheless, oil prices are expected to remain relatively elevated in 2023. However, this could change in the medium-term due to the expected easing of geopolitical tensions and the gradual transition away from fossil fuels. Therefore, Angolan authorities will have to take advantage of the current reprieve and invest in further diversification of the country’s exports away from the continued reliance on oil.
The issue of diversifying the Angolan economy remains an elusive obstacle for the country. Angola still has a significant potential to grow its exports from natural gas and natural abrasives. These represent the highest growth potential towards diversifying the Angola’s economy and export earnings. Apart from this, Angola should also deepen its integration in the SADC region and increase its intra-regional trade. This will provide an opportunity for Angola’s exports to compete against goods and services of comparable quality from the SADC region. Moreover, Angola can offset the risks with its traditional export markets by increasing its dependence on the SADC region for its exports.