Previous Quarterly Editions
Expropriation Risk: 66 65 66 64 ►Political Violence Risk:51 51 59 51 ▼Terrorism Risk:25 24 23 23 ►Exchange Transfer and Trade Sanction Risk: 64 64 63 63 ►Sovereign Default Risk:66 74 82 83 ►
TREND ►
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Protest intensity to date* 2022 2023 Low MediumUnrest risk in 2024**Cost of living: HighAnti-austerity: High
Angola suffered a setback in the first quarter of 2023 as economic growth contracted for the first time since it emerged from a six-year recession that ended in 2021, after recovering from the impact of the COVID-19 pandemic and benefitting from a sharp rise in oil prices triggered by Russia’s invasion of Ukraine in February 2022. The government insisted, however, that the 1.1% contraction in GDP growth represented a temporary stagnation rather than a return to recession and was attributable to “an abrupt drop” in output from the oil sector. Non-oil growth continued on its upward trend, expanding by 2.8% of GDP.
President Joao Laurenco’s ruling People’s Movement for the Liberation of Angola (MPLA) government expressed confidence in official forecasts of 3% growth for 2023, although several independent forecasts suggest that economic growth is likely to fall well below 2% because of persistent weakness in oil sector activity. The specter of a return to the 2016 – 2021 recession — which saw Angola’s economy contract by 10% — is expected to weigh heavily on confidence, although higher-than-expected revenues from oil exports in 2022 and sharp falls in the levels of public indebtedness should provide greater fiscal headroom for increased government spending.
Angola launched an ambitious privatization program in 2019, which sought to dispose of some 200 state-owned enterprises as part of the government’s drive to diversify the economy away from its over-dependence on hydrocarbons; however, the “Propriv” program was knocked off course by the COVID-19 pandemic. Propriv has since been relaunched and extended to 2026, with privatization of Unitel (the telecoms company), Banco de Fomento Angola and TV Cabo expected to take place this year
and privatization of the Angolan Debt and Equity Exchange (Bodiva), a 30% stake in Sonangol (the state-owned oil company) and Endiama (the state-owned diamond miner) to take place in 2024. All privatizations will take place via an initial public offering.
Diversifying Angola’s economy away from its decades-long over-dependence on oil and gas exports — hydrocarbons still account for around 50% of GDP and more than 90% of foreign exchange earnings — remains one of the Laurenco government’s top priorities. Due to the need to attract new inflows of foreign direct investment, any risk of state expropriation of private sector assets is likely to be extremely remote.
On the contrary, the government has bent over backward to provide a more attractive investment climate by passing new investor protection legislation, providing more attractive investment incentives such as favorable tax rates, providing access to speedy legal recourse to settle contract disputes, and liberalizing cross-border payments.
Steady but persistent improvements in the country’s overall investment climate — Angola rose 46 places in Transparency International’s Corruption Perceptions Index in 2022 — lies behind a marked uptick in inward investment flows. The Luanda-Benga Special Economic Zone (SEZ) north of Luanda, for example, founded more than a decade ago, has attracted more than US$3 billion since 2018 in the non-oil sector.
Foreign direct investment has been particularly strong in agriculture and food processing, light and heavy industry, digital technology and pharmaceuticals. The United Arab Emirates is currently the leading investor in the SEZ with a total stock of US$351 million, followed by the United Kingdom with US$283 million and China with US$225 million.
TREND ▼
After the closest election contest between the MPLA and the opposition National Union for the Total Independence of Angola in 2022, the jury is still out on whether the ruling party will be able to recover the ground it has lost in the eyes of millions of impoverished and disenchanted Angolans. The MPLA’s narrow victory — amid accusations of vote rigging — was widely seen as a sign of profound disillusion with the nominally Marxist-Leninist party among the country’s 35-million-strong population, two-thirds of which is under the age of 24 and has no memory of the 1975 – 2002 civil war that left Angola in ruins.
Discontent is focused on the economy and the vast disparities of wealth between rich and poor, where nearly half the population ekes out a subsistence living on US$1.90 a day while a tiny elite enjoys fabulous wealth in a country where poverty, corruption and a high birth rate blight prospects for the many.
Rising oil prices on the back of Russia’s war on Ukraine helped generate record earnings of some US$40 billion in 2022, much of which the government is seeking to invest in growing the non-oil sector to help boost job -creation, especially for youth, but which critics fear may be too little, too late.
Terrorism and violent extremism continue to present major challenges to sustainable peace and development across much of the African continent, although Angola, a predominantly Christian country, has been largely free of domestic terrorism threats for most of the past 15 years.
The separatist Front for the Liberation of the Enclave of Cabinda has not been active since 2010, although there are mounting fears for the country’s political stability due to decades of under-development and elite theft of the state’s natural resources.
After steady declines during 2021 to 2022, Angolan inflation spiked upward to reach a four-month high of 11.25% in June, up from 10.6% in May, after the government decided to abandon attempts to defend the kwanza and cut public fuel price subsidies. Projections of a return to single-digit inflation by 2024 now seem optimistic.
Jose de Lima Massano, the governor of Angola’s national bank, kept benchmark interest rates unchanged at 17%, citing a sharp depreciation of the kwanza that is stoking inflationary pressures. The kwanza is one of the worst-performing currencies in Africa to date in 2023, lower oil prices compared with 2022 peaks and increased debt payments, made it too costly for the central bank to prop up the currency.
The kwanza was trading at around 830 to the U.S. dollar in June 2023, sharply weaker than the 502 – 506 rate to the dollar the currency had been trading at since November 2022. Fears are mounting that renewed inflationary pressures could trigger a renewed bout of food price riots — something that could undermine political stability.
Angola’s interest payments to external creditors, largely China, doubled from US$775 million in the first quarter of 2023 to US$1.5 billion in the second quarter of the year, following the end of a three-year debt moratorium with Beijing — although the country’s debt-to-GDP ratio has now fallen to around 80% from an estimated peak of 130% in 2020, when the country appeared at risk of a sovereign default .
Yields on Angola’s largely dollar-denominated bonds spiked to a crippling 30% with the onset of the COVID-19 pandemic, when global economic activity collapsed and oil prices plummeted to US$30 a barrel, triggering debt moratoriums by Western and Chinese creditors. Luanda’s fortunes began to rebound following Russia’s invasion of Ukraine, which saw oil prices peak at US$125 in 2022.
Angola’s ability to renew servicing of its external debts — including 254 loans totaling US$42.6 billion to Chinese creditors — signals the passing of the southwest African country’s sovereign debt crisis. Angola has assumed a budget benchmark oil price of US$75 a barrel, and with prices currently in excess of US$90 a barrel, the country is on course to notch up a healthy fiscal surplus for 2023.
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