"Recent abrupt falls in oil prices are accentuating Angola's budget and external deficits and increasing financial pressures," reads the note explaining the change in opinion on credit quality.
The document, sent to Lusa, adds that "the financial support programme of the International Monetary Fund (IMF) should be insufficient to cover financing needs, forcing Angola to seek external commercial sources, which are now more difficult to access due to the current turbulence in the financial markets".
The downgrade of Angola's rating, which is thus further downgraded to non-investment grade, comes about a month after the last review, and far from the review scheduled for August this year, something analysts explain by the fact that market conditions have changed substantially.
"The reason for the deviation from the planned timetable is a sharp drop in the price of hydrocarbons and a review of our assumption of prices for 2020 and beyond," reads the text accompanying the decision.
On February 7, when S&P last assessed Angola's rating, the forecast for the price of oil this year was 60 dollars per barrel in 2020 and 55 dollars next year, which compares with the current forecast of 30 dollars per barrel for this year and 50 dollars in 2021, all below the 55 dollars forecast in the General State Budget for this year.
"Despite noting the significant efforts by the Angolan authorities to reform the economy over the last three years, a combination of unfavourable global economic conditions and external shocks have undermined the potential positive benefits of these reforms, exacerbating the already high fiscal and external metrics," write the analysts.
On the macroeconomic forecasting side, S&P forecasts that the country will experience negative growth of 1.5 per cent this year and that international reserves will fall from 17 billion at the end of last year to 13 billion by December 2020.
"Even so, as oil prices are expected to rise in 2021, and oil production is expected to remain more or less at current levels, this will sustain positive economic growth in the medium term, with Angola growing 1 percent in 2021, before accelerating to at least 2 percent between 2022 and 2023," which is not enough to prevent negative 'per capita' growth due to currency depreciation and population growth.
As far as public debt is concerned, S&P predicts a sharp rise this year, with the ratio to GDP rising from 103.1 per cent in 2019 to 127.2 per cent this year, before falling to 114.4 per cent in 2021.
