Near-term macroeconomic prospects continue to improve in the context of higher oil prices and a gradual global recovery from the pandemic shock, but the medium-term outlook remains challenging and highly uncertain. Oil production remains muted, debt and inflation remain elevated, and non-oil activity is expected to recover only gradually. However, continued strong fiscal performance (aided by higher oil revenues), exchange rate stabilization, and a return to positive non-oil growth would contribute to a reduction in the debt-to-GDP ratio this year, easing debt vulnerabilities.
While improving, the economic outlook remains highly challenging, given the slow and uncertain recovery from the COVID-related shocks. Heavily dependent on oil, the Angolan economy has suffered from weakness in that sector, with falling production (related to the pandemic) and only a partial rebound in international prices recently. These shocks have led to a fifth straight year of recession and hardship. The public debt-to-GDP ratio has risen to very elevated levels, driven by recent real exchange rate depreciation. Nevertheless, strong fiscal performance and active debt management are setting the stage for a gradual economic recovery and reduction in debt vulnerabilities.