CATHOLIC UNIVERSITY OF ANGOLA CENTRE FOR SCIENTIFIC STUDIES AND RESEARCH 1 INDEX PREFACE 5 1.- INTRODUCTION 13 1.1.- The macroeconomic stabilization 19 1.2.- The sector of real economy 24 1.3.- The oil Geograhy in Southern Africa 32 1.4.- Poverty 35 2.- THE INVOLVING CONTEXTS OF THE NATIONAL ECONOMY 46 2.1.- The International Context 46 2.1.1.- The developed economy 49 2.1.2.- The emerging economies 51 2.1.3.- The African economy 51 2.1.3.1- The strategic position of Angola in Africa 55 2.2.- The internal structural and economic factors 59 3.- THE MONETARY SECTOR 68 3.1. Introduction 68 3.2. Cambial and monetary policy 71 3.3.- Cambial market and exchange rate 73 3.4.- Monetary market and interest rates 76 3.5.-The interest rates of the banking system 80 3.6.- Monetary aggregate 83 3.7.- The financial system 89 4.- FISCAL AND BUDGETARY POLICY 92 4.1.- Introduction 92 4.2.- Budgetary implementation 94 4.2.1.- Public revenues 94 4.2.2.- Public expenditure 96 4.2.3.- Expenditure per activity 97 4.2.4.- Budgetary balance 98 5.- GENERAL LEVEL OF ACTIVITY 98 5.1.- Introduction 98 2 5.2.- Gross Domestic Product 100 5.3.- The priority sectors for production variation 111 5.4.- Agriculture and rural development 116 5.4.1- The world food crisis and its effects in Angola 118 5.4.2- The evolution of the structures of agriculture production and its supporting institutions 120 5.4.3- The forestal, farming and cattle breeding production 121 5.4.4- Evolution of some of the current main programs 127 5.4.5- Training and research 131 5.4.6- Financing the agrarian sector 132 5.4.7- The bio-fuels 133 5.4.8- Poverty and rural development 134 6.- THE NATIONAL EXPENDITURE 135 7.- BALANCE OF PAYMENTS 142 7.1- Introduction 142 7.2.- Current account 142 7.2.1. – Assets accounts 143 7.2.1.1-Exports 144 7.2.1.2 –Imports 146 7.2.2- Balance of services 147 7.2.3.-Incomes 147 7.2.4.- Current transfers 148 7.3.-Finance and capital balance 149 7.3.1.-Short and long term loans and other capital 149 7.4.-Overall balance 149 7.5.-Medium and long term stock of foreign debt 150 8.- EMPLOYMENT AND PRODUCTIVITY 152 8.1.- Introduction 152 8.2.- Approaching unemployment and productivity 155 8.3.- Public policies of professional training and employment 162 8.3.1.- Public administration 165 8.3.2.- Labour Administration 172 9.- INFLATION AND LIVING CONDITIONS 187 9.1.- Previous remarks 187 9.2.- The inflation behaviour in 2008 189 9.3.- Living conditions and purchasing power 196 3 10.- PERSPECTIVES 199 10.1.- The world economy 199 10.2.- The great economies 201 10.3.- Emerging economies 201 10.4.- The African Sub-Saharan economy 203 10.5.- The Angolan economy 204 10.5.1.- Projections of the GDP 210 11.- SUMMARY OF THE MAIN ECONOMIC FACTS IN 2008 213 BIBLIOGRAPHY 234 4 Preface 1. This is the seventh edition of the Annual Report on the Angolan economy published by the Catholic University of Angola, through its Centre for Scientific Studies and Research (CEIC). As usual, we may not share the comments and analysis contained in this document, but the fact that it is the most complete, rigorous and thoroughly researched document on the Angolan economy is hardly denied. The report is basically focused in three levels of analysis. The world context, particularly the world financial and economic crisis; The African implication with stress on the SADC region; and, naturally, the essential object of the report: The Angolan economy. 2. In regard to the existing crisis, we must admit that it has become for the first time a world issue, taking systematically and in a more or less intense form the world economies in general in double sense: By the manner it has been spreading and by the different kinds of impact. Therefore, this is neither just one more crisis, nor is it the last crisis and the beginning of the end of capitalism and of the market economy, as is still expected (and dreamt?) by some. This is a global systemic crisis. The fall of the Soviet economy in the early 1990’s triggered a systemic crisis as well in the system of central economic direction. The determinants were different and its effects tenuous on the world economy. However, there was at this level a very important effect: The argument that the failure of this kind of model brought about by reasons beyond the simple economic dimension, marked the great victory of capitalism, the market economy and the free initiative. The socio-liberal and ultra-liberal economic thoughts (particularly from the Bush Administration era (which we avoid to classify) start a dominion over the public and private policy making, and over the behaviour of companies and institutions and even the individual attitudes. It was the great “drunkenness” of free initiative and self interest. The State was relegated to limited supplementary functions. The logic that the market should regulate and self-regulate everything became untouchable and very quickly and opportunistically taken and 5 propagated by the international institutions, from the IMF to OCED, and going though the national and the international banking systems, all inspired by what was happening in the USA. The consequences were not far to be felt, all mechanisms of regulation were weakened ( including, and very seriously the auditing and rating companies, which are now left totally overlooking, irresponsibly as if nothing had to do with them); huge speculative “cracks” created in the financial systems and supported by an amazing credit expansion in consumption and real estate provided with a lot more flexibility compared to those given to companies for investment, and with less immediate results, as is the case of research and development. 3. Subjacent to this uncontrolled evolution of the free initiative and self interest is also the marginalization or extinction of values that should support the behaviour of individuals and societies. Mutual respect, truth, ethics, rigour, solidarity, and social and individual accountability were considered as lower values. On the contrary, deceit and corruption were adopted as reference values by individuals, families, companies and institutional powers; “the ends justify the means” was transformed into a wild lust based on the motto “consumption now” and the disregard for the religious practices and values. In the USA for example, but not only there, were already uncovered huge and unthinkable situations of fraud and economic crimes in this century, covering all levels of the financial and economic system: From the ENRON bankruptcy (a giant in the electrical sector), the Arthur Andersen case (auditing) and the Lehman Brothers (banking), to frauds committed by a lawyer who used to sell false bonds by imitating voices on the telephone (276 million Euros), and the manager who created a false financial pyramid scheme (36 billion Euros), a banker (187 billions), and still a corrector who manipulated confidential information (5 billions Euros). These are only few illustrations of what has also happened in other countries and continents. 4. The systemic impact was fast and generalized, because the globalization articulated the national and regional financial systems in a very closed way. The scope and 6 effect in the real economy is still to be determined. There are contradicting forecasts emerging every week about the scope and duration of the global systemic crisis. For instance, the most recent prevision of the OCED for 2009 indicate a break of the GDP of 6.8% in Japan (6.6% previously), of 4.8% in the Euro zone (4.1% previously), and 2.8% in the USA (4.0% before). For China, it is expected an even higher and positive growth of (7.7%) well above the previously expected (6.6%). The impact has not yet been permanently and totally felt, so all forecasts must be deeply pondered and carefully considered. However, it seems that the recovery will have 2 trains: China and the USA. Europe is expected to be the last great bloc to recover and only in the 2nd semester of 2010. If this forecast is materialized, we will see that although the repercussion of the financial and economic crisis is systemic and global, it will not reach the feared catastrophic expression (in 1929, the crisis in the USA provoked a break of 25% in the GDP and rose the unemployment rate to 30%). Nevertheless, the economy will register good changes of structure, fundamentally in the industrial sector, through new technological and more amicable solutions of the environment and less intensive in energy and in the same time, the capitalist concentration process will be accelerated. On the other hand, the real economy starts to feel the effects of a more selective and expensive credit policy. Unfortunately the massive cash that is been injected have only helped the banks to cover their own big holes and not to support the recovery of the economy. Let us wait for the systemic effects, but of different nature this time. In the meantime, unless new and considerable injection of capital is made, the recovery of the real economy may be hampered. There is only a sign of concern: the reduction 7 or elimination of the supplier’s credit to clients, and the majority of payments being now made in cash. 5. Although positive, the recovering process already in course will not make us forget the causes of the current situation, and there are already rising voices against the excessive regulation that is been implemented.