Oil-dependent economy
Being the second largest oil producer in Africa, Angola relies heavily on the sector. Oil accounts for around one-third of the country’s GDP and 80 percent of exports. However, in recent years decreasing oil production has been taking place in a recurrent economic recession. Angola’s government has recently implemented reforms in order to promote economic diversification, including privatization and improvement in market competition. The country still lacks a favorable business environment. In 2020, Angola ranked among the lowest on the Ease of Doing Business Ranking.Elevated inflation
The list of challenges for the Angolan economy also includes the accelerated devaluation of the national currency and the consequently high inflation. In 2021, on average one U.S. dollar was worth 638 Angolan Kwanzas. For comparison, in 2018, when the country adopted a floating exchange rate, one U.S. dollar was equivalent to 252.8 Angolan Kwanzas. The devaluation of the local currency reflects on the prices of products available to the population. Angola relies on imported items, and food articles are the second main import. In turn, food is the main component of the country’s inflation, estimated at 24 percent in 2022.Large external debt
Furthermore, the depreciation of Angola’s currency contributes to increases in foreign debt. As of 2020, the country owned around 68 billion U.S. dollars to foreign creditors, one of the highest stocks of external debt in Sub-Saharan Africa. That same year, the public debt to GDP ratio was estimated at 137 percent. Among creditor countries, China holds the largest share of Angola’s public debt by far. In almost two decades, Angola borrowed around 43.2 billion U.S. dollars from China.
