The economic expectations of Angola’s central bank TEY_post_Manuel-António-Tiago-DIAS

According to data from the National Bank of Angola, the economy grew 0.7% in 2023. For 2024, we project economic growth of around 2.1%.

Manuel António Tiago DIAS Governor NATIONAL BANK OF ANGOLA

BNA’s economic expectations for Angola

April 24, 2024

Manuel António Tiago Dias, governor of the National Bank of Angola (BNA), talks to The Energy Year about the bank’s mandate, what BNA has done to fulfil it and how economic expectations for 2024 may affect monetary and exchange rate policies. BNA is the central bank of Angola.

What are the main mandates of BNA, and how were they fulfilled in 2023?
The National Bank of Angola, as the central bank of the Republic of Angola, has a main mission, which is imposed both by the constitution and by Law No. 21/24 of 18 October – the BNA Law – which consists in guaranteeing price stability in the economy, with a view to ensuring the preservation of the value of the national currency.
The law establishes that the secondary mission of the National Bank of Angola, no less important, is the stability of the national financial system. After all, the stability of the national financial system also ends up effectively contributing to price stability in the economy, given the catalytic role that financial institutions play in the economy, through financial intermediation, which naturally consists of capturing savings, which is subsequently used to finance the needs of economic agents.
Regarding the way in which the bank fulfilled these objectives last year, we can say that the macroeconomic context, both internal and external, was extremely challenging. At the beginning of the year, we had a satisfactory trajectory, with a slowdown in the pace of price growth.
However, several phenomena that occurred, especially in the months of May and June, put the achievement of our goals into question. There was a substantial change in the fundamental goals that affected the performance of the National Bank of Angola’s mission.

What are the economic expectations for Angola in 2024, and how could they affect monetary and exchange rate policies?
Expectations for 2024 are better than what we observed last year, starting with greater stability in exchange rates, because last year we had a very substantial reduction in the surplus balance of the current account of the balance of payments.
In 2023, Angola’s exports, 95% of which consist of oil, dropped substantially. As a result, we also saw a substantial reduction – although to a lesser extent – in imports, especially food imports, which fell by more than 30%. The less favourable performance of external accounts meant that last year we recorded a reduction of around 50% in our foreign currency assets.
On the other hand, we also saw a reduction of around 86% in gasoline price subsidies. All this had a significant impact on the general price level. We closed the year with inflation of 20%, fundamentally influenced by the depreciation of the national currency. This depreciation was around 39%, representing the most relevant factor that affected the economic performance of the previous year.
We hope that for 2024, based on the information we currently have available, economic activity in the current year will be better than what we experienced last year. According to data from the National Bank of Angola, the economy grew 0.7% in 2023. For 2024, we project economic growth of around 2.1%.
This growth will be driven mainly by the performance of the non-oil sector, as the oil sector will continue to face major challenges. It is obvious that this economic growth projection could improve if government projects materialise, particularly those related to increasing productive activity, especially food production. Regarding prices, we estimate that inflation will be around 19%.

What will be the main challenges in controlling inflation?
The most important challenges are related to the increase and regularity of the supply of goods and services in our economy. What we observed last year was a huge imbalance. Firstly, there was a reduction in imports, particularly of food products, which fell by more than 30%. Secondly, the growth of economic activity in the non-productive sector was lower than the population growth rate, which is estimated to be around 3% per year.
In fact, the supply of goods and services has been insufficient in relation to demand, and this constitutes a major challenge for the central bank in terms of meeting the inflation target that we have established for 2024.
To meet expectations, the supply of goods and services will have to increase to reduce the gap between demand and supply. However, it is not enough to simply increase the supply; it is also necessary to have adequate regularity.
We believe that these are fundamental premises for us to have a reasonable performance – not necessarily positive, as 19% inflation is obviously not good. However, taking into account the structural changes that are occurring in our country, this would be the inflation rate we can achieve in 2024.
The most important thing is that we take the necessary measures to achieve the medium-term objective that we have set for ourselves, which is an inflation rate of around 7%, in line with SADC macroeconomic convergence goals. We will do everything in our power to achieve this by 2028.
In our strategic plan, we also understand that reducing inflation is extremely fundamental for the development of macroeconomic activities and above all for improving the purchasing power and wellbeing of families.


What role can BNA play in increasing credit to the private sector?
Increasing credit to the economy may seem paradoxical, given the inflation targets that the National Bank of Angola is committed to achieving. However, from our perspective, increasing credit to the productive sectors, in particular to the agricultural sector, will contribute positively to the fulfilment of the main mission of the National Bank of Angola, which has to do with price stability in our economy.
The sector of goods and services that puts the most pressure on prices in our economy is the food and non-alcoholic beverage sector. I am referring to essential consumer goods, essentially made up of half a dozen goods.
The country has the potential to produce these essential goods internally, replace their imports and, in the medium term, generate surpluses for export. I’m not saying that this is easy to achieve, but it is something that we can envisage in the medium term.
In fact, there are many government initiatives dedicated to this purpose. There are several government programmes, namely PLANAGRÃO, which is a programme that aims to produce cereals and grains on a large scale. We believe this is extremely important for our country.

How important are investments in renewable energy for the country’s diversification process?
Investments in the energy sector are fundamental. We know that large investments were made in the production of hydroelectric energy, with emphasis on the construction of two large dams recently. In fact, the energy supply in Angola is already essentially renewable, as it is mostly provided by existing dams in the national territory.
However, it is obvious that other initiatives are always welcome, given the great potential available in our country. It seems to me that solar energy and wind energy could allow energy production to reach consumers more quickly. We understand that this can be a great opportunity to promote business activities in our country, especially agro-industrial production.

What are the next steps in the process of consolidating Angola’s banking sector?
Commercial banks must play the role of catalysts for the country’s economic activity. For this reason, the National Bank of Angola has implemented measures to ensure that banks are solid and efficient in attracting deposits and granting credit to the economy.
To this end, there is a set of legal and regulatory instruments that have been approved and implemented in recent years as part of the adjustment of the Angolan financial system to the best international practices and standards.
Among the panoply of laws that have been approved and published recently, we highlight the review and adaptation of the National Bank of Angola Law, the General Regime of Financial Institutions Law, the Payments System Law, as well as the Prevention and Combat of Capital Laundering, Financing of Terrorism and Proliferation of Weapons of Mass Destruction Law.
These laws clarify and reinforce the functions of the National Bank of Angola so it can better perform its role as a monetary, exchange rate, macro-prudential and resolution authority, as well as a manager of payment systems in the Angolan financial system.
Consolidation is important because, if we have solid commercial banks, they will be able to better play their role in the economy.
That is why we have been adopting standards that aim to increase the capital of financial institutions operating in our country, reinforce their governance and internal control models, strengthen the framework for preventing money laundering and combating the financing of terrorism and strengthen the cybersecurity risk alert and mitigation systems.

How important are investments in cybersecurity in strengthening the Angolan banking sector?
This is a current and transversal issue that does not only concern the Angolan banking sector. It’s a global issue. Financial institutions, due to the role they play, end up being more exposed than others.
Within the Angolan financial system, we have taken measures to encourage banking institutions to adopt all necessary mechanisms to mitigate cybersecurity risks so as not to be harmed. We understand that financial institutions have been the target of several attack attempts. Therefore, they must make the necessary investments and be properly trained to prevent these attacks and guarantee the continuity of their activities.

What is your final message to international investors?
Angola is a country open to the world and potential investors. It is also a country that offers many opportunities.
We reiterate once more the need to increase the domestic production of essential consumer goods. The potential of this sector is enormous, as Angola is one of the African countries with the most arable land and abundant water resources. Our rivers have the particularity of originating in Angola and flowing and draining in Angola. Fortunately, Angola is a country that does not have the potential for conflicts with neighbouring countries over water.
We have a lot of potential. We have large investments in infrastructure, especially related to the production and distribution of electricity, and regulatory authorities have also been working on improving transport and communications infrastructure. With this, we believe that the necessary conditions are being created for the development of economic activities in our country.
On the central banking side, we have done our part. As part of the liberalisation of the foreign exchange market in Angola, we have already liberalised the current account of the balance of payments.
The only limitation that still remains in the capital account concerns investments in public securities. Foreign investors who wish to invest in Angola can transfer their funds from abroad to Angola freely. These transfers do not require prior authorisation from the National Bank of Angola.
With regards to the repatriation of dividends and capital, the National Bank of Angola also does not directly intervene. The process is handled exclusively between the investor and their commercial bank. The investor only needs to subsequently notify the central bank about the investment made for statistical recording purposes because statistics are important for monitoring everything that happens in the economy in general.
It is important to note that we are open and working to allow potential international investors to choose Angola as a safe destination for investment.
Finally, I would like to highlight that Angola is a safe country. You can travel peacefully anywhere in the country, without any security concerns, and there is therefore free movement of people and goods. Thus, Angola is doubly safe: a safe country to invest in and a safe country in which to operate.

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