The Angolan Economy: Growth in a Volatile Oil Market Environment

Non-oil activity continues to drive economic growth

Economic growth in Angola slowed sharply in 2025 after accelerating to 4.4% in 2024. Real GDP is estimated to have expanded 2.3% YoY in H1 2025, driven by a resilient non-oil sector (+4.6%) that offset a contraction in oil output (–6.5%). The decline in hydrocarbons reflects natural depletion of mature offshore fields, limited exploration, and maintenance-related production stoppages. The non-oil sector (retail, agriculture, fisheries, transport, and communications) remains the key growth driver. For 2026, the government expects GDP growth to reach 4.2%, with the oil sector recovering modestly (+1.1%) and non-oil activity continuing to expand (+4.7%).

Inflation to maintain a downward trajectory

Annual inflation is expected to ease to 17.5% in 2025 from 27.5% in 2024, despite diesel price hikes during the year. Food prices continue to dominate CPI movements but are exerting less pressure. Inflation is forecast to decline further to 13.7% in 2026, supported by a stable kwanza and tight monetary policy.

Fiscal deficit to improve, but only moderately

The 2025 fiscal deficit is now projected at –3.3% of GDP, with a modest primary surplus of 0.7%, reflecting lower oil prices (US$67.5/bbl) and production (1.06 mbd) than budgeted, higher transfers, and moderate fuel subsidy reforms. The 2026 budget totals AKZ 33,217 billion, aiming for a deficit of –2.8% of GDP and a primary surplus of 0.4%, with total revenues at 13.3% of GDP and expenditures at 16.1%. Oil-related tax revenues are expected to fall below 50% of total revenues for the first time, while non-oil taxes and other revenues gain significance. Debt service continues to dominate spending, but its share of total expenditure is gradually declining.

Public debt is expected to decline

Public debt is projected at 49.2% of GDP in 2025, down from 55.1% in 2024, with external debt representing roughly 70% of the total. Debt-to-revenue ratios are stabilizing (299% in 2025) and interest payments as a share of revenue are declining (23.7% in 2026), reflecting stabilizing exchange rates, favorable economic growth, and the updated national accounts base.

Oil prices under pressure

Global oil supply is expected to outpace demand in 2026, keeping crude prices under structural pressure (Brent at ~US$55/bbl). Geopolitical risks remain the key upside factor. Sensitivity analysis indicates that if oil prices reach US$72/bbl and production is 5% above budget projections, revenues could rise 14.1% from current estimates, reducing the deficit to –0.9% of GDP. Conversely, oil at US$50/bbl and output 5% below projections could lower revenues by 14.1%, pushing the deficit to –4.7% of GDP in 2026.

Fiscal outlook to remain challenging

Angola’s outlook reflects a structural shift toward the non-oil economy, moderate fiscal consolidation, declining debt service pressure, and continued sensitivity to oil price and production volatility. As a result, effective management of public finances and diversification of revenue sources remain critical to sustaining growth and macroeconomic stability.