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Angola: Economic Performance Assessment
December 2008

Acknowledgements: FANRPAN acknowledges Development Experience Clearinghouse (DEC) as the source of this article: http://dec.usaid.gov/index.cfm


To read the full publication online visit: http://pdf.usaid.gov/pdf_docs/PNADN864.pdf

Introduction

This report is one of a series of economic performance assessments prepared for the EGAT Bureau to provide USAID missions and regional bureaus with a concise evaluation of key indicators covering a broad range of issues relating to economic growth performance in designated host countries. The report draws on a variety of international data sources and uses international benchmarking against reference group averages, and statistical norms to identify major constraints, trends, and opportunities for strengthening growth and reducing poverty. For Angola, the reference groups are lower-middle-income countries globally (LMI), and lower-middle-income countries in sub-Saharan Africa (LMI-SSA). For direct comparators, the study uses two large and dynamic lower-middle-income countries, Brazil and South Africa. Brazil is the largest and most dynamic economy of the former Portuguese colonial world and has achieved a solid record of rapid and sustained growth over the past decade. Angola and Brazil also have close relations and many trading contacts, and Angolans view Brazil’s economy as a model for their own. South Africa represents an important regional aspiration case for Angola in many areas of economic performance.

Methodology

The methodology used here is analogous to examining an automobile dashboard to see which gauges are signaling problems. Sometimes a blinking light has obvious implications-such as the need to fill the fuel tank. In other cases, it may be necessary to have a mechanic probe more deeply to assess the source of the trouble and determine the best course of action. Similarly, the Economic Performance Assessment is based on an examination of key economic and social indicators to see which ones are signaling problems. Some "blinking" indicators have clear implications, while others may require further study to investigate the problems more fully and identify appropriate courses for programmatic action.

The analysis is organized around two mutually supportive goals: transformational growth and poverty reduction. Broad-based growth is the most powerful instrument for poverty reduction. At the same time, programs to reduce poverty and lessen inequality can help to underpin rapid and sustainable growth. These interactions can create a virtuous cycle of economic transformation and human development.

Transformational growth requires a high level of investment and rising productivity. This is achieved by establishing a strong enabling environment for private sector development, involving multiple elements: macroeconomic stability; a sound legal and regulatory system, including secure contract and property rights; effective control of corruption; a sound and efficient financial system; openness to trade and investment; sustainable debt management; investment in education, health, and workforce skills; infrastructure development; and sustainable use of natural resources.

In turn, the impact of growth on poverty depends on policies and programs that create opportunities and build capabilities for the poor. We call this the pro-poor growth environment. Here, too, many elements are involved, including effective education and health systems, policies facilitating job creation, agricultural development (in countries where the poor depend predominantly on farming), dismantling barriers to micro and small enterprise development, and progress toward gender equity.

The present evaluation must be interpreted with care. A concise analysis of selected indicators cannot provide a definitive diagnosis of economic performance problems, nor simple answers to questions about programmatic priorities. Instead, the aim of the analysis is to spot signs of serious problems affecting economic growth, subject to limits of data availability and quality. The results should provide insight about potential paths for USAID intervention, to complement on-the-ground knowledge and further in-depth studies.

The remainder of the report presents the most important results of the diagnostic analysis, in three sections: Overview of the Economy; Private Sector Enabling Environment; and Pro-Poor Growth Environment. Table 1-1 summarizes the topical coverage. Appendix A provides a brief explanation of the criteria used for selecting indicators, the benchmarking methodology, and a table showing the full set of indicators examined for this report. Appendix B provides a full tabulation of the data and international benchmarks examined for this report, along with technical notes on the data sources and definitions.

The current economic crisis

This report was written during the onset of a global financial crisis and economic downturn, reflecting data available as of October 2008. A precipitous drop in the world price of petroleum, Angola’s dominant export, places the country’s growth performance at risk in the short term; and heightened risk aversion in financial markets is likely to reduce the flow of international capital into emerging market economies and complicate trade financing. Although crisis management is the order of the day, the cyclical shocks will reverse over the medium term, at which point the structural conditions discussed in this report will again become the major determinants of growth and poverty reduction.

Data quality and format

The breadth and quality of economic data for Angola are poor. Data for many indicators are unavailable or out of date. Links to many data reports listed on government websites (Banco Nacional de Angola or BNA, Ministry of Finance, Instituto Nacionial de Estatistica) were inoperative at the time of our research and where data were available time series tables were lacking. The World Bank’s statistical capacity indicator for Angola is a very low 35 (on a rising scale of 1 to 100), meaning that the country meets few of the international criteria for accessible, useful, and reliable data on economic and social indicators. Brazil and South Africa both score 77 on this index. In addition, economic conditions in Angola have changed enormously in the past three years; hence, any data more than a few years old are not very relevant to an analysis of current growth prospects. Throughout this report, we note topics for which data are particularly sparse or problematic. Because robust and timely economic data are imperative for sound economic policy management and planning, improving data quality should be high on the list of priorities for technical assistance from donor agencies.

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