SEATTLE — In an effort to regain economic growth in Angola, the country has entered into talks with the World Bank to request financial support in the wake of dramatic declines in oil prices.
After the end of a civil conflict that lasted three decades ended in 2002, the southern African country, Africa’s second-largest oil producer, experienced a period of increased growth, consumerism and public spending. But since slumps in oil prices in 2009 and 2014, progress has slowed.
Things have gotten worse for the country in the past year. Along with serious currency devaluations, it has suffered high job losses and civil unrest.
Despite these setbacks, there are still significant opportunities for economic growth in Angola.
Financial leaders in the country are confident that the downturn can be weathered with modest use of foreign reserves and external financing. The country’s central bank is cracking down on money laundering and other forms of corruption. These measures, along with extensive regulation reforms, will make foreign and international banks more comfortable with supplying the country with U.S. dollars. Angola’s kwanza is currently valued at 155 to the dollar.
Albeit at a lower level compared to recent years, it is estimated that there will be some economic growth in Angola this year.
The country’s resilience is in part attributable to the newness of its economic climate. When the long-awaited peacetime began in 2002, Angola had an opportunity to rebuild from the ground up. As a result, much of its industry and infrastructure is appropriately modernized.
Plus, Angola has been bracing itself for declines in oil prices for several years. Since the initial slumps in 2009, the government has prioritized finding ways to diversify the economy in order to reduce dependency on oil and other natural resources and commodities with falling prices.
Although reforms did not come quickly enough to avoid some turbulence, there is still much to be said about promising progress being made in the country on this front.
Compared to other African countries, Angola is doing a lot to attract foreign investment. In the past few years, the government has invested heavily in schools, universities, hospitals, health care and infrastructure. It has also implemented reforms that help out small- and medium-sized enterprises run by young and vibrant business leaders.
The Fundo Soberano de Angola (FSDEA) is one of many sovereign wealth funds in the country that aims to assist the process of diversification. Specifically, FSDEA focuses on the development of the hospitality market. In response to a rising demand in business tourism, increased public and private investments in the hospitality market have been supported and incentivized via tax exemptions and other liberalizing mechanisms.
Another feature of Angola’s post-war boom was the rapid growth of a consumer class, which many companies believe will continue to expand despite the recent downturn.
Increased consumerism helped the country become one of Africa’s highest spenders, which makes it particularly attractive to multinationals that deal in public sector goods and services.
These are tricky times for Angola, but with some help from the World Bank and the continued confidence of foreign investors and multinationals, its efforts to diversify its economy could lead it to another period of significant growth.