Angola, Africa’s second-biggest oil producer, is caught in a paradox where the commodity’s price has increased income while making the economy more vulnerable at the same time, United Nations officials said.
Per capita income in the OPEC member is $3,750 a year, more than three times the wage threshold to be classified as a middle-income country by the UN, Tesfachew Taffere, director of the UN Africa Division for Least Developed Countries, told a conference in Luanda, the capital today. However, an index of economic vulnerability has worsened since 2005 even as diversification increases, he said.
“Oil money is being used in construction, the service sector is expanding and internally there may be diversification, but in terms of export dependence, they are still vulnerable,” Taffere said in an interview. “God forbid if next week the price of oil goes down.”
Crude oil pumped by companies such as Total SA (FP) and Chevron Corp. (CVX) makes up 97 percent of exports and 80 percent of tax revenue. Angola is seeking middle-income status to help it rebuild from a 27-year civil war that ended in 2002 by gaining access to credit guarantees that lower the cost of public investments containing private funding. The World Bank forecasts the $114 billion economy will expand by 7.2 percent this year.
The UN said it’s allowing Angola’s income level to be the only measure for it to qualify to middle income status by 2020 because rapid prosperity from oil should allow socio-economic transformation. Typically countries also need passing grades in health and education or a measure of external risk to the economy, areas Angola currently doesn’t meet.
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