Angola struggles with contingent liabilities

​Angola’s economy has undergone a major structural shock in response to the persistence of low oil prices. Growth is expected to reach 1.5% in 2016, 0.5% in 2017 and 2% in 2018 (see chart 1). Due to operational inefficiencies associated with the state-owned oil operator Sonangol, oil output has not grown significantly over the last two years. 

​In fact, it fell short of the government’s 1.8 million b/d target. Oil accounts for 97% of total exports and makes up over 75% of government revenue. The shock has deteriorated Angola’s macroeconomic stability. The local currency - kwanza - depreciated by 40% against the dollar since September 2014. This drove up inflation, which may reach 30% y/y in 2016. China is the country’s most important external partner. It has lent over USD20bn to Angola since 2002 and has 50 state-owned and 400 private companies operating in the country. As China transitions to be more consumer-driven, it is pivoting to vibrant services and manufacturing economies while scaling down its exposure to resource-rich countries with poor governance such as Angola. ​​