Economy

Angola's many natural resources make it one of Africa's wealthiest nations.

During 2011, Angola continued with its main macroeconomic policy of reducing inflation, deepening international reserves, and increasing capital spending on infrastructure to promote economic diversification and poverty reduction. The country continued to implement the IMF Stand-By Arrangement (SBA) program (USD 1.4 billion in liquidity), which was signed in November 2009. The SBA aims to increase fiscal and monetary discipline; reform the exchange rate system; improve public financial management; create a sound banking system and enhance fiscal transparency. In 2011, Angola took measures to overhaul the tax regime, establish a debt management unit and manage and track the flows from the oil sector to the budget. The Central Bank (BNA) moved away from a temporary rationing exchange rate system to an auction system. A comprehensive strategy for private sector development was also drawn up. A contraction in capital expenditure and better expenditure control during 2011, allowed the authorities to make domestic arrears repayment of the USD 7.5 billion, which it had incurred since 2009.

The government continues to allocate more than 30% of its budget to social spending. In 2012 budgeted social expenditure will increase by 1.6% to 33.3%, double what will be spent on defense, security and public order; and education and health budgets will be increased by 10%.

Economic growth and fiscal sustainability are still highly dependent on the oil revenues.

Angola is Africa’s second largest oil producer, after Nigeria, producing over 1.9 million barrels per day (bpd). Since the global economic slowdown and the acute oil price drop that triggered domestic fiscal and balance of payments shocks, the country has been gradually recovering. Its GDP growth slightly increased from 3.4% in 2010 to an estimated 3.5% in 2011, driven mainly by rising oil prices and strong non-oil sector growth of 7.7% which helped to offset production problems in the oil sector. The country is expected to record GDP growth rates of 8.2% and 7.1% in 2012 and 2013 respectively. This will be driven mainly by the start of the USD 9 billion Liquefied Natural Gas (LNG) project and the expected increase of oil production to over 2 million bpd. Inflationary pressures remained high at 14.5% in 2010 and an estimated rate of 13.5% in 2011 mainly as a result of strong growth in domestic demand. However, this is projected to fall to 10.0% and 9.4% in 2012 and 2013 respectively.

Second to oil, diamonds are Angola’s main export product. Major diamond reserves are located in northeastern Angola, a region endowed with the finest and top quality stones. In fact, 70% of diamonds discovered are of great quality, listing the country among the main diamond producers.