OIL IN ANGOLA

The Economic Impact and Implication of Oil In Angola

The Economic Impact and Implication of Oil In Angola

Critiquing the literature/academic paper

Summary of the Paper

The Angolan economy is highly dependent on the oil sector, and it has been badly hit by falling prices and demand in 2009. GDP growth, one of the fastest in the world for years, did not exceed 3.4% in 2010, after falling to 2.4% in 2009. It reached 13.8% in 2008. Despite the recovery in oil prices, growth was hampered in 2010 by an accumulation of arrears of debt in the sectors of construction and infrastructure. The forecasts are nevertheless optimistic growth should rebound to 7.5% in 2011, driven by high oil prices and a recovery of public investment program (PIP). Inflation remains a problem in Angola. After years of erosion, it rebounded in 2008 (6%) to 13.7% in 2009 and still make a point higher in 2010. It is expected to dip to 11.7% in 2011 (OECD, 2006, p. 19). The return of inflation is explained by deterioration in the exchange rate and the sharp increase in prices of petrol and diesel after the removal of subsidies. Inflation should remain in double digits in 2010 and 2011 because of structural constraints on public transport and distribution of agricultural products. Efforts to support the exchange rate in 2009 severely widened the currency reserves, causing a revision of the monetary policy that was included in the new constitution approved in February 2010 (OECD, 2006, p. 19). The Banco Nacional de Angola (BNA) now responds to the definition of exchange rates and interest rates alongside the Ministries of Planning and Finance. With the recovery of the budget balance and the current account, which began in 2010 in the wake of rising oil prices, monetary policy should be loosened in 2011, the benefit of private sector activity. If the non-oil activities have grown an average of 14% for four years, the diversification of the economy remains weak. The construction sector and infrastructure are very dependent on PIP, and agricultural growth merely reflects the effect of catching the 27-year civil war suffered by the country until 2002. The mining industry remains dominated by oil and diamonds, although the pre-war holdings of iron ore, gold and copper current resume. Trade, which had developed informally during the war, was severely disrupted in 2010 by the displacement determined by the market authorities of Santerio Roque, previously the largest market in sub-Saharan Africa. Industrial activities are largely dominated by companies in the oil and gas sector (OECD, 2006, p. 19). While the public sector has always struggled to attract private investment in many sectors, have been tackled since 2002 in major social and economic challenges without significant explosions of violence. The general shortage of qualified human resources is the main obstacle to growth in the medium term. The authorities hope to improve short-term access to basic services through an ambitious plan of infrastructure development, encouraged by the good credit rating, country risk (OECD, 2006, ...