New medium-term country risk assessment for Angola

In mid-August 2024, the CMSR prepared a new medium-term country risk assessment for Angola, following its own country risk assessment methodology.

Angola’s overall medium-term country risk has not changed since our last assessment in December 2022, and the country is still classified as having a high medium-term country risk (D), however it is bordering on very high risk.

The CMSR assigns the assessed country to one of five risk categories:

·         A - Minimal medium-term country risk

·         B - Very limited medium-term country risk

·         C - Limited medium-term country risk

·         D - High medium-term country risk

·         E - Very high medium-term country risk

In addition to the final country risk assessment, each country risk category, i.e. political, economic and financial risk, is also classified into one of these five risk categories.

Medium term political risk remains very high. The lack of job opportunities and the high cost of living resulting from high inflation and the further removal of fuel subsidies will continue to cause discontent and protests this year and next, but we expect that the authorities, with the help of the security forces, will be able to prevent protests from spreading throughout the country. In addition, the high level of endemic corruption (which is not expected to decrease significantly in the medium term), the weak rule of law, the inefficiency of institutions, the underdeveloped democratic process, high income inequality and poverty, the unstable exchange rate, the country's continued dependence on oil and the slow diversification of the economy, capital constraints, and the country's vulnerability to climate change all increase the political risk. Furthermore, these factors have a negative impact on the business and investment environment and discourage much-needed foreign direct investment, which is a major contributor to job creation. All things considered, analysts believe that Angola will remain politically stable, however, tensions will increase ahead of the next parliamentary elections in 2027. On the foreign policy front, the government will continue its efforts to maintain good relations with both the West and China, which, despite the government's desire to reduce its dependence from China, will remain the country's most important trading partner and lender.

The medium-term economic risk is high, as is the financial risk. GDP growth is set to strengthen over the next four years, reaching 3.7% by 2028, according to EIU forecasts. In the medium term, GDP growth will be supported by a strengthening of private consumption and an increase in oil and gas production, which will boost export growth. The main long-term economic policy objective is to diversify the economy, using oil export revenues. These will also be used to increase social spending, develop infrastructure and repay public debt. Nevertheless, unemployment will remain high in the medium term. The budget has returned to a low surplus this year, which will gradually increase with further fiscal consolidation. Monetary policy will be tightened in the coming years to bring down currently high inflation, while the kwanza will continue to depreciate against the dollar, thus holding back a faster decline in inflation. Angola will remain heavily dependent on oil exports and therefore on world oil price developments. The balance of payments current account will remain in surplus over the next four years, thanks to export growth and a positive balance of trade, but the surplus will gradually decline. External debt will also decline over the next four years, as will debt servicing. Servicing the foreign debt will not be a problem for the government thanks to solid foreign exchange reserves.

We expect political relations between the Slovenia and Angola to remain good and economic cooperation to remain modest. The latter will be limited mainly to trade in goods, however, Slovenian exports to Angola will remain low. To increase economic cooperation between the two countries in the medium term, in particular higher forms of cooperation, it would be necessary to strengthen the political presence in Angola. The business and investment environment will remain complex and Slovenian companies are therefore encouraged to work with local agents.

Angola Medium-Term Country Risk Assessment can be ordered at: info@cmsr.si 

More information: darja.zlogar@cmsr.si