Last updated September 2008 Recent Political Developments - Angola ’s historic legislative elections were held on September 5 and 6, 2008. Despite some organizational problems in Luanda’s provincial capital, including missing voter bulletins and delays in opening voting stations, the elections were acclaimed by national and international observers as peaceful. Although minor incidents of intimidation were reported by opposition candidates in various parts of the country, no major cases of violence were reported.
- The ruling party, the Popular Movement for the Liberation of Angola (Movimento Popular de Libertação de Angola, MPLA) won a majority seats in parliament with 81.64 percent of the vote as compared to only 10.4 percent for the National Union for the Total Independence of Angola (União Nacional para a Independência Total de Angola, UNITA), the main opposition party. The rest of the votes were divided among the other eight parties and four coalitions that contested the elections.
- National Assembly: MPLA will take 191 of the 220 National Assembly seats whose members are elected to four year terms. As the results indicate, there are no hopes for a strong opposition in the next Angolan legislature. MPLA’s victory gives the party the two-thirds majority in parliament needed to change the Constitution and entrench its dominance of the country’s politics.
- New Government : since MPLA won more than two thirds of the votes, the new government which is expected to be in place by mid-October, will only be composed of MPLA’s ministers.
Recent Economic Developments - Recent economic performance continued to be strong, with both the oil and non-oil economy performing well. GDP has doubled every third year, from 19.8 billion in 2004 to 30.6 billion in 2005, jumping to 41 billion in 2006 and reaching 60.4 billion in 2007. The GDP real growth rate of 22.3% in 2007 reflected the real growth of 20.4% of the oil sector and 25.7% of the nonoil including growth of 37% in construction, 32.6% of manufacturing and 27.4% of agriculture.
- Inflation is growing at a faster pace, a fter declining to 11.7% in the twelve months ending in March 2008. Inflation for the 12 months ending in July reached 12.5%, the highest rate in the last two years when inflation registered 12.68% in July 2006. Given the European origin of a large share of imports, the devaluation of the dollar do not help keep prices down and the recent increases in international prices of food do have an impact on domestic inflation as the country imports large quantities of food items.
- The nominal exchange rate has been virtually unchanged in the last twelve months after a 16% appreciation of the Kwanza from October 2005 to July 2007. In the last three and a half years the dollar has lost close to half of its value in Kwanzas in real terms. Central Bank interventions and a shift in preferences for the local currency have kept the nominal exchange rate stable and, given the inflation differential, resulting in the sharp real appreciation of the Kwanza.
- The fiscal surpluses have increased in the last years, from 7.1% of GDP in 2005 to 9.9% in 2006 and reaching 11.3% in 2007. Between 2003 and 2007, revenues grew at an annual average rate of 53%. As revenues grew faster than expenditures, the surplus increased. Although budget surpluses have increased in the last years, the fiscal health is still very dependent of oil revenues. However, the non-oil fiscal balance has improved and deficits have declined from 75% of GDP in 2003 to 55% in 2007. Excluding interest payments and grants, non-oil deficit declined from 72.5% of non-oil GDP in 2003 to 52.6% in 2007. Despite this solid improvement, it is still high and well above average for oil-exporting sub-Saharan African countries. It is likely that the overall fiscal surplus in 2008 will be very close to the 2007 levels, around 11% of GDP.
- Preliminary data from the Central Bank show trade surplus reaching 46% of GDP in 2007, while the current account represented 11% of GDP given the high deficit registered in the service account (21% of GDP). Oil exports have been strong as prices rose in the last years and, even with the recent decline in prices, they remain well above previous years. Additionally, diamond exports are expected to grow even faster than in previous years. Net international reserves reached US$16.5 billion in July 2008, an increase of 47% compared to December 2007.
- The medium term outlook is positive, withGDP expected to grow at about 15% on average per year in the next two years (2008-2009) and about 8% average in 2010-11, driven by the oil sector.
- Fiscal deficit is projected to be sustainable in the medium and longer term assuming the authorities will pursue prudent macroeconomic policies. The overall fiscal surplus in 2008 will be very close to the 2007 levels, around 11% of GDP but declining substantially to around 3% in 2009. Additionally, non-oil fiscal deficit, excluding interest payments and grants, is likely to remain around 50% of non-oil GDP. Inflation is projected to fall to single digits in 2009 as economic growth slows from the extremely high rates of the last three years and further decrease in the future. The external current account will continue to be positive until the peak in oil exports in 2010. The exchange rate is expected to continue to appreciate.
World Bank Assistance to Angola Assistance to the government and society: Angola joined the World Bank Group in 1989, and World Bank assistance began in 1991 with a credit from the World Bank's International Development Association (IDA) for economic management capacity building. The World Bank has established a Country Office in Luanda from which country dialogue and project oversight take place. The World Bank works closely with the International Monetary Fund (IMF), UN agencies, donors and non-governmental organizations active in Angola through the country office. The World Bank Group supports Angola’s efforts to reduce poverty and to promote sustainable economic growth. Working in close partnership with the Government, development partners and civil society, the World Bank seeks to promote shared growth for poverty reduction through empowering institutions and all Angolans. IDA’s current assistance strategy is set out in the current Interim Strategy Note (ISN) presented to IDA’s Board of Executive Directors in May 2007, following the implementation of the previous ISN in 2005-2006. The ISN sets out IDA’s program of assistance in terms of preparation of potential future projects and areas of analytic and advisory support until June of 2009. The ISN’s support for the government’s program for 2007 and 2009 is based on three pillars: - strengthening public sector management and government institutional capacity;
- supporting the rebuilding of critical infrastructure and the improvement of service delivery for poverty reduction ;
- promoting growth of non-mineral sectors.
These pillars are being implemented through support for the activities started under the previous ISN, and modest new lending. It will also entail analytical and advisory work that will build on past efforts, complement new projects, and help inform and prepare the ground for a Country Assistance Strategy. The World Bank’s portfolio comprises eight projects with a total amount of committed credits and grants of US$365 million dollars from IDA , and grant co-financing of US $104 million dollars. The projects are: Investment and assistance to the private sector: The International Finance Corporation’s (IFC) activity is critical to the third pillar of the Bank’s Interim Strategy Note (2007-2009) – “promoting growth of the non-mineral sectors.” IFC is increasing access to financing for Small and Medium Enterprises (SMEs); providing trade finance and credit lines to local commercial banks. With the World Bank it will develop a strategy to support the newly formed Angolan privatization agency with advisory services and ultimately financing to privatized companies. IFC holds a growing portfolio of US $12.2 million with key industries in financial markets, general manufacturing and services. To date it has three major investments: 
| A 15% shareholding in NovoBanco Enterprise Bank of Angola S.A.R.L., a bank targeting medium and small enterprises. The Bank has a capital base of US $4 million and is expected to have a strong developmental impact by helping to create new jobs, accelerate business growth, and boost confidence in the banking sector. To date, the bank has disbursed more than 1,000 loans with a value of USD $6 million to Luanda’s small entrepreneurs. | | A $1 million equity investment in Nova Sociedade de Seguros de Angola, S.A.R.L. (Nossa), which represents 16.7% of Nossa’s share capital. Nossa is the third insurance company in Angola and the first private insurance company. |
| IFC provided a US $10 million loan to Odebrecht Serviços no Exterior, a wholly owned subsidiary of Construtora Norberto Odebrecht of Brazil. The financing will be used for infrastructure improvements in the Luanda Sul urban development project. IFC will also provide technical assistance on Odebrecht’s HIV/AIDS program in their Angolan operations. This work will likely lead to further involvement with the company. |
The Multilateral Investment Guarantee Agency's (MIGA) provides guarantees to private companies investing in client countries. MIGA's outstanding portfolio in Angola consists of two guarantees in the services and manufacturing sectors with a gross exposure of US $6.4 million. In addition, MIGA’s on-line investment promotion services ( www.fdixchange.comand www.ipanet.net) feature 103 documents on investment opportunities and the related legal and regulatory environment in Angola. |
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