"The recent maintenance of the 'rating' and the change in the perspective of evolution, to Positiva, by the Fitch Ratings agency, reiterates the positive position in which the Angolan economy finds itself at the beginning of 2023", write the analysts in a comment to the decision of the agency, announced on Friday night.
Fitch Ratings improved the outlook for Angola's rating evolution to positive, maintaining its opinion on the quality of the sovereign credit at B-, below the investment recommendation, and at the same level assigned by Moody's and Standard & Poor's.
"The prospect of positive evolution reflects the recent sharp drop in public debt, large current account surpluses and lower financing risks, supported by a more favorable oil environment", reads the note that accompanies the decision to maintain the rating at B-, two levels below the investment recommendation, ie 'trash', or 'junk' as it is generally referred to.
Maintaining the rating at this level "balances the significant structural weakness, namely the poor performance in governance and human indicators, high inflation and one of the highest levels of dependence on raw materials among the countries analyzed by Fitch, with the decrease in the ratio of public debt to GDP, higher international reserves compared to peers and improved macroeconomic stability", they added.
For Oxford Economics, this decision by Fitch shows that the country "is on the right path", since, despite the weakened oil production and the fall in oil prices will influence economic growth this year, "the 2022 aid had a favorable effect on the risk perception of the country".
Recalling that the current account surplus is expected to worsen to 8.1% of GDP this year and that the budget balance is expected to decline to 1% of GDP, Oxford Economics concludes that "although these figures represent a slight weakening in the face of the strong growth in 2022, Angola should keep the twin surpluses [trade balance and budget balance] in positive territory and reduce the public debt, which suggests that the country is on the right track, and Fitch's opinion shows that the rating agency agrees with this vision".
In the note released on Friday night, Fitch Ratings forecast economic growth of 2.7 percent this year and 2.5 percent in 2024, the year in which public debt is expected to reach 54.5 percent of GDP. .
"Fitch estimates that real growth in Angola's Gross Domestic Product (GDP) has accelerated from 0.7 percent in 2021 to 3.1 percent in 2022, mainly due to the robust performance of the non-oil economy, but also due to the return to positive growth in the oil sector; we forecast economic growth to slow to 2.7 percent this year and 2.5 percent next, mainly due to a decline in production," says Fitch Ratings.
In the note that accompanies the announcement of the decision to maintain the rating at B- and improve the outlook for evolution to positive, Fitch analysts write that "activity in sectors other than oil should remain robust, reflecting government spending on efforts of diversification and the reduction of pressures on inflation".
Fitch estimates that inflation has dropped from 28.8 percent in 2021 to 22.2 percent last year, "sustained by an appreciation of the kwanza and the strengthening of the weight of food in the basic basket (to 55 percent) , and is expected to slow further to an average of 14 percent in 2023 and 11 percent next year."