Angola: Prices of food, health, and clothing nearly doubled in four years

Prices of food, health, and clothing have almost doubled since the beginning of the Covid-19 pandemic in the country in 2020, according to calculations by Expansão based on data from the National Statistics Institute (INE) on the National Consumer Price Index (IPCN).

In the last four years, eating, seeing a doctor, buying medication, as well as clothing, basic things in a person’s life, have become much more expensive, a reality that indicates that most Angolan families end up spending most of their income on essential items, leaving almost nothing for savings or culture, for example. Just to give an idea, from 2020 to 2023, healthcare costs rose by 87.9%, while food and non-alcoholic beverages increased by 84.8%, and clothing and footwear prices increased by 82.0%.

The exponential rise in prices of essential goods contrasts, on the other hand, with softer increases in average prices of classes such as housing and fuel (37.6%) and communications (25.7%). This is because fuel prices are subsidized by the state and over these four years only gasoline increased (in June last year), and telecommunication prices can only increase with authorization from the sector supervisor. In other words, these classes ended up being more controlled and outside of the market logic, which is when supply decreases prices increase. This is precisely what has been happening with essential goods such as food or medication, products that are mostly or entirely imported, and subject to fluctuations in a national currency that has depreciated by 75% against the dollar since 2018 (the start of the exchange rate reform).

Despite these increases in basic goods prices, salaries have not increased enough to compensate for the purchasing power of families. Just look at the national minimum wages, which have only increased once since 2020, by 50%, which means that this increase was unable to compensate for the loss of purchasing power. Angola is one of the countries in the world with the most people living in extreme poverty.

According to the World Poverty Clock, a site funded by the Government of Germany, at the end of last year 11,160,949 Angolans, equivalent to 31% of the country’s population, were in extreme poverty, meaning they had less than 2.15 USD per day for basic expenses, including food. And this number has been constantly growing. Just to give an idea, according to this application financed by the German Ministry for Cooperation and Development, in the year Angola began a cycle of five consecutive economic recessions (2016 to 2020), the country had 6,602,520 citizens in extreme poverty, equivalent to 28% of the population. Today there are an additional 4,558,429 people.

The fact that the national economy is systematically growing less than the population means that Angola has been “producing” more and more poor people because the economy cannot generate enough jobs for the number of people entering working age. And inflation, which is a kind of hidden tax, has its share in the impoverishment of Angolans.

Weak internal production

The economist from the Center for Research of the Lusíada University of Angola (CINVESTEC), Heitor de Carvalho, says that there is a global trend of high food prices, largely due to supply chain issues, and ensures that the price spiral in the country results from two factors, which are inseparable, such as the reduction of oil production in Angola and the fall in oil prices in the international market. Heitor de Carvalho says that to avoid this upward trend in prices, it is essential to produce consumer goods internally to increase flows of essential goods offerings. “This may seem mediated by two realities, or by the exchange rate, because with more currency demand than supply, the exchange rate deteriorates and consequently product prices also deteriorate.

In the last four years, we had a period when this happened exactly the opposite. For example, in 2022, the exchange rate increased and prices decreased, something the INE could not detect,” emphasizes the economist, ensuring that the rise in prices results from shocks in real incomes (revenues) resulting from oil exports. Heitor de Carvalho says the “magic wand” to stop the price spiral is for Angola to gradually move away from oil dependence. However, he recognizes that currency devaluation is another factor that interferes in price trends. “But it is necessary to understand that when oil revenues are declining and as long as we do not eliminate our oil dependence, this will have a direct impact on prices. Prices result from the real reduction of our production and maintaining wages, prices rise and scarcity increases,” he argues.