Ver Angola

Banking and Insurance

Fitch consultant downgrades credit growth in Angola to six percent this year

The consultancy Fitch Solutions this Sunday revised downwards the forecast for growth in bank lending in Angola, this year, to 6 percent, due to problems in the oil sector, recovering from the contraction of 1.3 percent in 2022.


"At Fitch Solutions, we forecast bank loan growth to grow 6 percent this year, after contracting to 1.3 percent in 2022; despite previously forecasting that loan growth would accelerate from 5.5 percent percent in 2021 to 9 percent in 2022, data recently released by the National Bank of Angola show that loans, in fact, fell by 1.3 percent in 2022", announce the analysts of this consultancy owned by the same owners of the rating agency financial Fitch Ratings.

In the note on the evolution of credit for this year, sent to investors and to which Lusa had access, Fitch Solutions writes that the data "reflect the acceleration in the main interest rate on loans, from 19.4 percent in 2021, to 20.1 percent in 2022, which put pressure on liquidity in 2022, reducing funds immediately available for loans" to customers in Angola.

"We anticipate that loan growth will recover to 6 percent, down from our previous forecast of 8 percent, following low base effects and a rise in credit demand from private consumers and businesses," they add.

Fitch Solutions supports the forecast of increased demand for credit in the improvement of inflation to 11.3 percent by the end of this year and a reduction in the key interest rate, to 17 percent, which will "relieve the pressure on the government purchases and encourage more spending by households and businesses, as there will be an added incentive to borrow to finance large domestic purchases and business projects".

On the other hand, notes Fitch Solutions, the problems in the oil sector will limit the rise in bank loans in 2023, given that the State should compensate for the reduction in tax revenue via oil through an increase in the use of internal bank financing.

"We anticipate that the price of oil will fall 4.1 percent this year, to an average of 95 dollars a barrel, and that oil production in Angola will fall 2.7 percent, so we assume a darker outlook for investments in the Angolan oil sectors, as there will be less demand for credit by the oil sector and associated industries", reads the note.

At the same time, they say, "the Government will have to increase its indebtedness with national banks to finance its expenditure, as it will have less oil revenue, which is worth more than 50 percent of total tax revenue".

As banks are traditionally more comfortable lending to the State than to companies, which have a default rate above 20 percent, "the increase in credit to the Government in 2023 will crowd out loans to the private sector", conclude the analysts.


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