Country Profile: Angola

• Angola is the third largest producer of diamonds in Africa and has only explored 40% of its diamond-rich territory. Angola is an oil-based economy, with oil exports accounting for more than 90% of country’s exports.
• Angola’s current exports and imports figures stands at US$ 42 billion and US$ 16.38 billion respectively.
• India’s bilateral trade figures with Angola remained at US$ 5.2 billion in 2014-15, which reduced to US$ 4.31 billion in 2018-19. India has a major trade deficit with Angola as we mainly import crude oil and petroleum products.
• Energy is at the heart of the burgeoning India-Angola partnership, since the country is emerging as the second largest African oil supplier to India after Nigeria. Indian oil companies have been upbeat about investing in the energy sector in Angola.

Angola is the 60^th largest economy as per nominal GDP. But on the contrary, it is interesting to know that is has also been one of the fastest growing economies during the 21^st century. Despite owning rich agricultural land, extensive oil and gas resources, diamond reserves and hydroelectric potential, Angola remains a poor economy.

Angola is the third largest producer of diamonds in Africa, but it has only explored 40% of its diamond-rich territory. It is an oil-based economy, with oil accounting for more than 90% of its exports. Thus, the economy’s GDP is highly vulnerable to oil price fluctuations. Angola’s natural resources have helped it attract a vast amount of foreign direct investment ensuring strong economic growth over the past decade. But with sustained low crude oil prices and uncertain forecasts for the coming years, the economy is undergoing a series of major structural shocks.

Real GDP shrank by 0.2% in 2017 and an estimated 0.7% in 2018. Fiscal revenues plummeted by more than 50% between 2014 and 2017. Public debt, largely external, surged from 40.7% of GDP in 2014 to an estimated 80.5% in 2018, raising concerns about its sustainability. The country’s external imbalances created a shortage of foreign currency, which dampened growth in the non-oil sectors. In January 2018, the central bank adopted a more flexible foreign exchange regime that resulted in an overall depreciation rate of more than 40%. Inflation decreased from 31.7% in 2017 to an estimated 21.1% in 2018. As oil prices recovered, the current account deficit stabilized at 0.1% of GDP in both 2017 and 2018.

Since the end of the civil war in 2002, the economy has maintained political stability, along with substantial progress in economic and political terms. The major goal ahead for the country is to reduce its dependence on oil and diversify its economic outlook. This needs to be gratuitously supported by rebuilding of infrastructure, improvement in institutional capacity, governance, public financial management systems, human development indicators and the living conditions of the population. The economy is still characterised by large pockets of population living without access to adequate basic services.

However, the non-oil sector has shown a small improvement, largely driven by growth in agriculture. In January 2016, the government adopted a strategy for mitigating the oil crisis, finding new substitutes of oil for attracting foreign exchange revenues. It also foresees to look at other related drivers of growth, such as, steps in direction of investing in infrastructure, reduction of imports, financial sector reforms, improvement of business environment, and skills development of the labour force. These measures are aimed at reducing bureaucracy along with facilitation of credit. However, a lot needs to be done to ease the business environment.

Macroeconomic stability has been restored and maintained through a more flexible exchange rate regime, restrictive monetary policy and fiscal consolidation. The reform program is supported by a three-year extended arrangement under the Extended Fund Facility (EFF) from the International Monetary Fund (US$ 3.7 billion) and a programmatic series of Development Policy Financing (DPF) from the World Bank (US$ 500 million).

Macroeconomic indicators of Angola

Source: World Bank

Angola’s external trade

Source: ITC Trade Map

In 2014, Angola’s total trade was US$ 87.42 billion, which declined to US$ 58.40 billion in 2018. Angola’s current exports and imports figures stands at US$ 42 billion and US$ 16.38 billion respectively. Major exporting destinations of Angola are China, India, US, Spain, South Africa and Portugal. Similarly, major economies from where Angola imports includes China, Singapore, Belgium, Portugal, US, Brazil and Togo.

Major traded products of Angola

Source: ITC Trade Map

India-Angola trade and commercial relations

Source: ITC Trade Map

India’s bilateral trade figures with Angola remained at US$ 5.2 billion in 2014-15, which reduced to US$ 4.31 billion in 2018-19. India has a major trade deficit with Angola as we mainly import crude oil and petroleum products. India’s exports and imports to Angola in 2018-19 remained at US$ 282.3 million and US$ 4.03 billion respectively. There has been a continuous rise in India’s exports to Angola from 2016-17 to 2018-19 as the exports figure jumped from US$ 154.2 million to US$ 282.3 million.

The India-Angola relationship is also characterised by strong government-to-government engagement. The Government of India extended a line of credit of US$ 40 million to Government of Angola for CFM Railway Rehabilitation Project. This was the first Government-to-Government initiative between the two countries. The project was handed over to the Angolan Minister of Transport on August 28, 2007. EXIM Bank of India extended three credit lines of US$ 5, 10 and 13 million for agricultural equipment and Indian tractors. Two additional lines of credits of US$ 30 and 15 million to construct a cotton spinning and ginning plant and an Industrial park were approved by EXIM bank in 2010.

Top ten products of export potential from India to Angola (Symmetric Revealed Comparative Advantage or SRCA)

Major products that India exports to Angola include medicaments, meat, sweet biscuits, rice and woven fabrics. Imports from Angola are dominated by crude and petroleum oils, which have more than 3/4^th share. Other imported products include natural gas, non-industrial diamonds, scrap of primary cells and batteries and manganese ores. Energy is at the heart of the burgeoning India-Angola partnership, since the country is emerging as the second largest African oil supplier to India, after Nigeria. Indian oil & gas companies like GAIL have been upbeat about investing in the energy sector in Angola.