"Our rating on Angola is conditioned by its low GDP [Gross Domestic Product] per capita, high dependence on oil and a weak institutional framework, although gradually improving; these factors keep Angola highly susceptible to external shocks and global oil sector dynamics and result in structurally high inflation and relatively weak public finances," the analysts wrote in the note that explains the decision to maintain the opinion on the sovereign credit quality at B-, below the investment recommendation.
In the text, S&P says that "short-term liquidity pressures have largely eased after the Angolan government reduced outstanding external debt by 4 billion dollars in 2024, but fiscal slippage, susceptibility to external shocks, particularly an oil price shock, and the high dollarization of the economy, represent a persistent risk".
Debt servicing, despite being reduced, continues to be a problem for the Angolan economy due to the "high and expensive debt servicing", in addition to spending on fuel subsidies and the "rapid increase in wage costs".
S&P forecasts the economy will grow an average of 2.7 percent through 2028, "supported by reasonably stable oil production volumes coupled with improving non-oil sector activity," and also predicts the budget deficit, which the government had forecast at 0.02 percent last year but ended at 1.2 percent, will widen to 1.5 percent due to wage increases and fuel spending.
"We have had a slower pace of reduction in fuel subsidy burdens, which represents a significant easing of fiscal policy compared to the very rigid approach of recent years, which could result in the accumulation of more debt and increase the cost of debt servicing from 2026 to 2028," warn analysts, recalling that the cost of debt interest is worth 25.8 percent of State revenues this year, down from 30.4 percent recorded last year.
As for economic growth, S&P estimates that Angola will grow 2.5 percent this year, almost half of the 4.7 percent recorded in 2024, and then stabilize at 2.8 percent through 2028.
