Why Angola lost its spot to Kenya as Africa’s third largest economy
From boom to bust to crash? Angola, the continent’s number-two oil producer, is suffering from its dependence on petroleum and China’s retreat from the international commodities markets
Angola has lost its position as Africa’s third-largest economy in dollar terms to Kenya, according to a new estimate from the International Monetary Fund.
Paramount among the reasons for Angola’s drop is the continuous contraction of its economy because of the decline in oil output in the past four years.
Another challenge is the recent devaluation of its currency, the kwanza, which dropped to a record low in 2019. The National Bank of Angola’s subsequent attempt to close the wide gap between formal and informal exchange rates led to an overhaul in its foreign exchange regime.
The outbreak of the novel coronavirus disease has had an equally harsh impact on the Angolan economy. There has been a sharp drop in the demand for Angolan oil since the start of the lockdown, as Angola’s principal buyer, China, has pulled away from international commodities markets.
Angola has reduced the volume of its shipments of oil to China, with which it pays for past loans.
Regional recession ahead
Analysts argue the impact of COVID-19 on the Angolan economy will exceed that of the country’s 27-year-long civil war.
The crisis is projected to make Angolan gross domestic product contract by 1.4% this year alone.
Angola experienced an oil-fuelled boom in the first decade of the century that made the country one of the fastest-growing economies in the world and Luanda (pictured) one of the most expensive cities anywhere.
Angola is currently the second-largest oil producer in Africa and a member of OPEC (the Organization of the Petroleum Exporting Countries). Oil accounts for over 90% of its exports. It produces approximately 1.37 million barrels of oil per day (bpd) and 17,904.5 million cubic feet of natural gas each year, and holds reserves of a further 11 trillion cubic feet.
The World Bank has predicted that the economic effects of the coronavirus pandemic will usher sub-Saharan Africa as a whole into its first recession in 25 years.
Africa’s most populous country, Nigeria, is the largest economy in the region, after growing by 22.5% in the fourth quarter of 2019, the country’s highest quarterly growth since its last recession in 2016.
South Africa remains the second-largest economy in Africa despite going into its second recession in two years, after its annualized GDP shrank first by 0.8% in the third quarter of 2019 and then by 1.4% in the fourth.
Fred Dzakpata
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