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The Economic Challenges Awaiting Angola’s Next Leader

·4 min read

(Bloomberg) -- Angolan President Joao Lourenco was declared the winner of the country’s closest election since the end of a civil war two decades ago, defeating opposition leader Adalberto Costa Junior.

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The National Electoral Commission announced Lourenco’s victory on Thursday, with his party winning 51.07% of the vote. The election marks the worst result for the ruling Popular Movement for the Liberation of Angola, or MPLA, which has led the country since independence from Portugal in 1975. Costa Junior’s party rejected the outcome. During Lourenco’s first term the southwest African nation recovered from a five-year recession that worsened unemployment and poverty.

The president has pledged to create jobs by diversifying Angola’s oil-dependent economy, reducing the government’s role and fostering private sector-led development.

Here are some of the main challenges the incoming president will face:

Economic Growth

Angola’s economy is expected to expand 3% in 2022, after exiting a five-year recession last year. But such growth is still largely dependent on the oil sector, which comprises at least 83% of its export revenue, with China accounting for 61% of its overseas sales.

Angola’s reliance on oil exports makes it the world’s least-complex economy, according to Harvard University’s Growth Lab. With crude production expected to continue declining as key producing fields mature, Angola urgently needs to diversify its economy away from oil.

Living Costs

Luanda was once branded the world’s most expensive city for expatriates. While domestic food production has increased, Angola’s small manufacturing base and poor intra-continental trade means many supermarket shelves are still lined with goods imported from Portugal.

Annual inflation in Angola has eased in recent months, after the central bank raised rates to a record, though it’s still above 20%. That’s forced the government to start a cash-transfer program to vulnerable families and suspend import taxes on basic-food products.

Still, many Angolans continue to struggle to make ends meet -- the World Bank estimates that more than half of its 33 million people live on less than $2 a day. The lack of buying power means Angolans face food insecurity, poor public education and reduced access to housing and basic services like sanitation and water.

Read: Global Outlier Angola Has Room to Cut Rate as Currency Jumps

Debt Sustainability

Higher oil prices have enabled Angola to repay some of its existing debt and diversify its sources of funding away from China, whose $19 billion worth of loans make up about 40% of the country’s external debt, according to S&P Global Ratings.

Fitch Ratings forecasts Angola’s central government debt will drop to 56.5% of gross domestic product in 2022 from 79.7% in 2021 and 123.8% in 2020. That will enable the future government to invest more of its revenue in improving the lives of ordinary Angolans as opposed to repaying debt, Finance Minister Vera Daves de Sousa said in an interview May 15.

Graft Fight

Corruption, both petty and grand, has thrived in Angola. Lourenco made the fight against graft a top priority when he came to power in 2017. His administration estimates that more than $24 billion was looted during the almost four-decade rule of his predecessor, Jose Eduardo dos Santos.

While Angola has improved its ranking in Transparency International’s Corruption Perceptions Index since 2017, graft is still rampant. Opposition parties accuse Lourenco of using his anti-graft crusade as a smokescreen to distract from the country’s economic woes and to settle a score with Dos Santos.

Read: Dos Santos Family Demands Pardon After Angolan Ex-Leader’s Death

Jobless Youth

The number of unemployed youth in Angola is estimated at 57%, according to Angola’s National Statistics Institute. That’s almost double the official unemployment rate of 30.2%. An estimated 79% of Angolans depend on the informal economy to survive, data from Angola’s statistics institute showed.

The lack of job opportunities is a key concern for policy makers in a country where the median age is 16.7 years and the fertility rate is 5.55 per woman, one of the highest in the world, according to the World Population Review.

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