Angola’s real household spending outlook is expected to experience growth of 3.1 per cent year-on-year, from an estimated growth of 0 per cent in 2021, after contracting by 4.7 per cent in 2020, following the impact of the pandemic, according to Fitch Solutions.

The rebound in consumer spending is likely to feed through to 2023, with total household spending (in real spending) to grow by AOA4.4 trillion (US$48.3 billion) in 2023, reaching pre-Covid levels.

“We forecast total household spending (in real terms) to reach AOA4.3 trillion (USD46.8 billion) in 2022, increasing from AOA4.2 trillion (US$45.4 billion) in 2021. However, this will be below the pre-Covid-19 levels of AOA4.4 trillion (US$47.8 billion) in 2019.”
Fitch Solutions

The forecast for an increase in consumer spending in Angola in 2022 falls within Fitch’s forecast for the country’s real GDP of 2.7 per cent following a contraction of 1.5 per cent in 2021. However, Angola’s real GDP will fall below its potential as domestic oil production is expected to be lower than previously projected, Fitch said.

According to Fitch, agricultural production is being affected by dry weather conditions in Angola and by extension the disposable incomes of around half of the country’s workforce and this will weigh on consumer spending growth in 2022.

“We project Angola’s average unemployment rate (as a % of the labour force) to increase to 7.3% in 2022 from 7.1% in 2021, reflecting a challenging economic environment.”
Fitch Solutions

Rising consumer price inflation is a key risk to consumer spending into the beginning of 2022, Fitch said, adding that it may potentially erode purchasing power. The country’s inflation rate for September 2021 came in at 26.6 per cent year-on-year, increasing from 26.1 per cent year-on-year in August 2021.

Pace of Vaccination to Influence Recovery

Food inflation will continue to drive an upwards pressure on headline inflation over the remainder of 2021, reducing household purchasing power. “Our Country Risk team forecasts Angola’s inflation to average 20.0% in 2022, decreasing from 27.0% in 2021.”

As economies reopen, consumers are demanding products which were less accessible in the previous year, albeit manufacturers are facing several problems. Supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.

“Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.”
Fitch Solutions

Covid cases are rising in some countries and as a result upending economic activities such as factory production in Asia, thereby disrupting shipping and posing more shocks to the world economy.

Similarly, manufacturers are facing supply constraints associated with key components and higher raw materials costs. While this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year, Fitch said.

The recovery rests on the country’s vaccination drive. As at November 7, 2021, 15.5 per cent of people in Angola have received at least one vaccine dose, Fitch noted. While this is a low vaccination rate, it is higher than the African average of 9.3 per cent. “We believe that a successful vaccine rollout will aid the country’s consumer recovery.”

There are however risks to the forecast that are highly likely to play out in 2022, including the easing of government support. However, Fitch is of the view that if other risks start to play out they may lead to forecast revisions.