Angola Joins Venezuela as a Big Loser in the Fall of Crude Oil

The selloff in the price oil has been a strong economic boost for US consumers. Especially as they are saving at the pump and spending more. They are also saving more money, which is just as encouraging.

However, energy exporting counties like Angola are being hurt badly.

We are seeing worsening economic conditions in Venezuela and Russia, as well, as crude oil continues to drop. Things are becoming worse in Angola. According to the Energy Information Agency (EIA), the country produces 1.75 million barrels a day. This makes Angola Africa’s second largest oil producer.

Angola is very dependent on oil production and sales to generate revenue, which in turn, supports their economy. This revenue accounts for 97 percent of its export revenues, more than the 95 percent seen in Venezuela. Right now the situation is grim and getting worse. Net export revenue has fallen 12 percent to $24 billion as production falls off. Oil exports accounts for fifty percent of the country’s gross domestic product (GDP). Angola has also slashed its oil price target for 2015 from $81 per barrel to $40 per barrel.

Things are Getting Worse, Especially for the Kwanza

Their currency, the Kwanza, has fallen to an all-time low against the US Dollar. This will have a drastic effect on fiscal and monetary policy for the country. Other oil exporters are in the same boat. As the price of crude continues to push lower monetary policy worldwide will be impacted. Right now, there is public anger brewing in oil rich country of Angola and it is directed at President Jose Eduardo do Santos. They have been forced to reach out to foreign lenders for money, at $1 billion, to pay bills.

As revenue continues to dry up, from the lack of oil exports, national budgets in Angola will be cut. This will bring out the nastiness. What will be cut? That will have to be seen. Certain segments of their population will feel it more making them increasingly unhappy. This distributional problem becomes a political problem for Angolan Government.

They need more foreign investment to help boost the economy and make up for the loss in oil revenue. This has been is not a strong point of their economy as Angola is one of the least transparent and corrupt countries in the world. We are also seeing massive inflation coupled with weakened GDP growth suppressing foreign investments. As this continues to worsen, Angola will have problems paying off their debt. Especially as their currency value depreciates.