Africa-Press – Angola. The financial rating agency Moody’s has worsened the outlook for the evolution of Angola’s economy, from Positive to Stable, maintaining the rating at B3, due to the slowdown in budgetary consolidation and high public debt.
“The decision to change the outlook to Stable reflects our expectation of a slower pace of fiscal consolidation than previously anticipated, with the risk of a deterioration in the peso and debt service driven by the depreciation of the kwanza remaining high,” the analysts wrote in the note released on Friday night.
In announcing the decision, Moody’s wrote that the rating level remains at B3, below the investment recommendation line, in a context in which Angola is expected to continue to record slight budget deficits in the coming years, despite stronger growth in Gross Domestic Product in the short term, and favorable conditions in the oil sector.
“The debt-to-GDP ratio is expected to stabilize at a higher-than-expected level, slightly below 60% of GDP, still much lower than at the end of 2020, when Angola’s rating was Caa1,” Moody’s writes, adding that “improvements in external vulnerability are also more limited than expected, with exchange rate volatility remaining high.”
The downgrade of the outlook for Angola means that Moody’s does not expect to raise or lower Angola’s rating in the next 12 to 18 months, in a context where debt refinancing risks have declined, but the Government continues to face a challenging debt profile, including significant bilateral debt payments, so that, taken together, this scenario shows that “risks are balanced for the B3 rating level”.
The maintenance of the opinion on the quality of Angola’s sovereign credit “reflects the economy’s lack of diversification, despite efforts to improve reforms and the business environment in recent years, and the significant dependence on the oil sector for both tax revenues and export revenues”, adds Moody’s, also highlighting the weak institutional framework and the vulnerability of public debt to volatility in exchange rates and interest rates.
In terms of macroeconomic indicators, Moody’s predicts that Angola will grow 3% this year and 3.3% in 2025, accelerating from the 1% recorded in 2023, and that public debt will be close to 60% of GDP by 2026.
The Government will have a primary budget deficit of around 2.8% between 2024 and 2026, below the 7% previously estimated, and revenues measured as a percentage of GDP will also decrease.
Moody’s predicts that oil production will remain at current levels of 1.1 million barrels per day, but prices are expected to fall compared to 2023 values, which will affect revenue for the State’s coffers.
“We anticipate a more gradual decline in the debt burden; from 2025 onwards the debt-to-GDP ratio will remain only marginally below 60%, higher than our previous forecast of around 40%,” Moody’s analysts conclude.
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