Credit rating agencies expect Angola to post lower economic growth

28 January 2015

Fitch Ratings expects Angola’s economy to post growth of just 3 percent this year and for oil prices to force a downward review of the country’s credit rating, said the director of the sovereign debt analysis group.

Carmen Altenkirch also told Portuguese news agency Lusa that “economic growth in Angola will certainly be less than estimated because the oil sector will contract and the non-oil sector will suffer the impact of the lack of dollars and reducied public spending.”

These new realities lead to Fitch Ratings to predict that expansion of gross domestic product is around 3 percent, roughly a third of what the government of Angola predicted in the state budget for this year, or – 9.7 percent.

The Fitch analyst for Angola also said that the credit rating may be revised downwards if the negative outlook continued for the Angolan authorities.

“The impact on the rating depends, ultimately, on how the government will respond, how and if spending cuts are made and if the budget deficit is limited,” Altenkirch said, recalling that Angola’s rating is currently “BB-” with a stable outlook.

Moody’s, for its part, is expected to revise Angola’s economic growth forecast for 2015 downwards from an initial 5.5 percent, according to analyst Lucie Villa.

“The impact of falling oil prices will depend on the extent and duration and production, as well as the dynamic effects of the shock throughout the economy, it seems unlikely that our original forecast of 5.5 percent growth in 2015 will be achieved this year,” said the analyst from the Moody’s team that analyses sovereign debt in the sub-Saharan region of Africa.

The analyst added she expected the fall in oil prices, of over 50 percent since June last year, “will put negative pressure on government revenue, the budget and the current account,” creating difficulties for an economy that is highly dependent on oil, on over 75 percent of tax revenues are based and accounting for over 95 percent of exports. (macauhub/AO)