Angola’s oil sector now accounts for less than half of economy

18 October 2010

Luanda, Angola, 18 Oct – The need for economic diversification is the “fundamental lesson” of the economic problems felt in 2009 in Angola, and it is worth noting that the oil sector currently accounts for less than half of the economy, Economy Minister Manuel Nunes Junior stated recently.

In an interview published in the Angolan magazine Exame, Nunes Junior said that the oil sector accounted for 43.5 percent of GDP in the revised budget, a figure much lower than in the last few years, and that this was due to policies meant to diversify the economy, especially those related to construction.

“There are a number of favourable aspects, such as rebuilding of roads and bridges, demining, construction of irrigation canals for agriculture, renovation of ports and airports, and improving water and power supplies,” he said.

Public investment in infrastructures “is very important for stimulating private investment” and public-private partnerships are “a way to share risks without immediately aggravating the state’s debt,” such as the case of the future Luanda airport.

The revised state budget envisages that agriculture will account for 11.5 percent of GDP in 2010, up from 6.8 percent in 2009, while the transforming industry will account for 7 percent, up from last year’s 4.9 percent.

Another example of diversification is the Luanda/Bengo special trade zone, meant to replace imports by national products with a view to lowering prices of goods.

“It is vital to use oil resources to increase national production and substitute imports. The high price of goods has been subject to constant attention by the head of government. This is because we are a country that imports consumer goods, with all the inherent logistics,” the minister said, cited by the Macauhub agency.

Nunes Junior is considered the main face of the Angolan government’s economic policy. He has a doctorate from York University and previously served as deputy minister of finance and head of the national airports and aviation authority.

Angola “is coming out of a difficult year” in which fiscal and oil revenues fell 45 percent and 55.23 percent respectively, while spending was only 11 percent lower. This created “serious problems in the economy”, although recession has been avoided.

“The fundamental lesson [of the crisis] is that we have to diversify the economy. We have to apply oil revenues in other areas that are less vulnerable to price oscillations. The effort has had encouraging results. Since 2006 the non-oil sector has been growing more than the oil sector,” he said.

This year’s forecasted economic growth is 6.7 percent. The main contributor will be the non-oil sector, which should grow 7.5 percent.

Nunes Junior said that public investment definitively got under way in the second quarter and “had an effect of immediately boosting the economy”.

“We have to realise that the public sector is still driving growth in Angola and that when it slows down the whole economy is affected,” he added.

Stimulation of the economy also involves changing the private investment law via a tax reform programme and improving the performance of public companies, which may include contract programmes with specific goals and the evaluation of directors. (macauhub)