Angola, with an estimated GDP of $134 billion in 2013, is the third largest economy in Sub-Saharan Africa. This is an oil economy: hydrocarbons contribute directly to nearly 50% of nominal GDP, where the contribution to the GDP rises to 80% also considering the activities indirectly supported by the demand from this sector and to 35% of the real one, 75% of tax revenues and 98% of export receipts. Half of these exports go to China, 10% to India and 7% each to the USA and Portugal. With Portugal, as a former colony, Angola maintains important economic ties. Subsidiaries of Portuguese banks hold over 50% of the country's credit portfolio and Portugal is also the main country of origin of imports (15% of the total), followed by Singapore with 13% and China with 12%. In the decade 2004-2013 Angola recorded an average growth rate (10,9% in the period) among the highest in Sub-Saharan Africa. The boost came both from extraction (+7,3% on average) and from the non-hydrocarbon side (+13,1%). The proceeds from the sale of gas, oil and diamonds and aid, both in the form of loans and donations (granted, among others, by China, Brazil, and the EU) have allowed the country to finance the reconstruction of the infrastructure destroyed during the civil war ended in 2002. The median per capita income has more than doubled in the past decade, reaching USD 7620 in 2013, the second highest in Sub-Saharan Africa after South Africa. The poverty rate fell from 68% in 2002 to less than 40% in 2012. Despite this progress, several indicators of economic and social development have not yet reached a satisfactory level. The country is in last place (181st) in the ranking Doing Business of the World Bank. L'Human Development Index (HDI), which takes into account life expectancy, level of education and per capita income, places Angola in the group of countries with low human development. According to the indicator of World Economic Forum, which takes into account the endowment of infrastructure, education, labor and financial markets, level of technology and institutions, in 2014 Angola has the worst competitiveness conditions among the top ten economies of Sub-Saharan Africa.
In the early seventies, Angola had a flourishing agricultural sector based on small family ownership, was self-sufficient in almost all food production and exported coffee (the fourth largest exporter in the world), maize and numerous tropical products such as tobacco, bananas, sugar cane, cotton and hemp. After the Civil War ended, the agricultural sector has started a gradual recovery and currently contributes 7% of GDPemploying two-thirds of the population. The production of corn, wheat, millet and tobacco has undergone significant development, while the coffee harvest is still modest. Angola, with an average of 1,8 million barrels of oil per day extracted in 2013, is the second largest producer in Africa after Nigeria. However, the known reserves are modest (12,2 billion barrels) and at the current extraction rate they would be depleted in 20 years. The oil sector is controlled by the state-owned company Sonangol, with which the foreign companies present in the country (including the high ENI, the Chinese Sinopec, Total) operate through joint ventures. On the other hand, Angola has limited refining capacity. There is only one active refinery in the country built in 1955, with a potential capacity of 39.000 barrels per day but a lower actual production. 85% of the fuel consumed is imported. A new refinery, currently under construction, is expected to start production in 2016. Angola is Africa's third largest diamond producer. Hydroelectric supplies about 70% of the electricity, although the generation capacity is estimated to be over ten times higher. The distribution system is extremely poor: currently there is no national electricity grid, while three regional networks operate which are not connected to each other although controlled by the national company ENE. In 2012, only 38% of the population was connected to the electricity grid. The manufacturing sector has a limited weight (6,8% of GDP). The main industries are food processing, refining, household chemicals (soaps and detergents), and cement manufacturing. The first Liquefaction Gas (LNG) plant in Soyo (with a capacity of 5,2 million tons per year), which exploits the country's gas fields, started operation in June 2013 but was soon closed due to technical problems: production will hardly resume before 2016.
The GDP dynamic is expected to slow down in 2014, mainly due to a greater decline in oil extraction activity. Support for economic activity is instead expected to come from public spending on infrastructure and new fields, favoring construction, energy generation and added services. The non-hydrocarbon part is expected to grow by 7,4% in real terms, while a greater contribution from hydrocarbons (thanks to new wells) and transformation activity is expected in the coming years, supported above all by gas liquefaction plants . As reported by Intesa Sanpaolo one is expected growth of 3,9% in 2014 and 5,9% in 2015.
The process of return of inflationary pressures. The trend rate, from the peak of 16% reached at the end of 2010, slowed down to 7,7% in December 2013 and to 7,2% in September 2014. The fall in inflation towards the lower limit of the target range (7%- 9%) allowed the Central Bank to ease monetary policy: the reserve ratio on local currency deposits was reduced in two steps, in June 2013 and in February of this year, going from 20% to 12,5%. In this scenario, after the large devaluation recorded between 2009 and 2010 (20%), in the following years the kwanza showed greater resistance, depreciating by about 2% each year. At the end of October 2014, the quotation was equal to 98,8 kwanza : 1 USD, with a depreciation of 1,3%.
In 2013 the state budget went into deficit (2% of GDP) compared to a surplus of 6,8% of GDP in 2012. The deficit is expected to grow to 4,9% of GDP. Angola's balance of payments registers a large current surplus (6,2% of GDP in 2013), thanks to the substantial trade surplus (equal to 41,9 billion, 31,2% of GDP in 2013). As of 2010 the financial account closed in deficit following the recovery of past investments by foreign companies resulting in a net outflow of funds into the FDI account. In 2013 the balance of payments surplus narrowed to 0,1 billion, from 4,7 billion the previous year. The stock of reserves covers 7 months of imports and is well above the foreign financial requirement. However, the external position is very vulnerable to the performance of the hydrocarbon market.
The economy, controlled by the public sector while private initiative has little room, presents a high degree of geographic concentration, with about three-quarters of GDP generated in the Luanda area, the country's capital. Angola has the highest degree of urban concentration in Sub-Saharan Africa, with 56% of the population living in large urban areas. The other regions of the country are in conditions of extreme poverty and isolation due to severe deficiencies in infrastructure, especially energy transport and distribution networks. Furthermore, due to the civil war, an entire generation of Angolans has been unable to access education and training. Just over 50% of the population has a primary education. More than 70% of the population aged between 20 and 29 lacks any professional education (this percentage rises to 80% among women). The current state of infrastructure and the scarce supply of skilled labor are a strong brake on development, especially in the non-oil sectors.
The state still exercises tight control over the economy and this condition, together with the shortcomings already mentioned, exerts a strong brake on the growth of the private sector and of the non-oil part of the economy. Angola therefore presents a high dependence on the cycle of raw materials. In this scenario the rating agencies consider the Angolan sovereign debt a speculative investment (BBaccording to S&P and Fitch, Ba3 according to Moody's).
