"The deterioration of the global economic outlook following the new coronavirus pandemic and the sharp drop in the price of raw materials is triggering significant volatility in the financial markets and risk aversion, to which few countries in emerging markets are immune", analysts write.
In a note that puts Angola, alongside the sultanate of Oman and the Kingdom of Bahrain, on the list of the most vulnerable to this risk aversion by investors in times of uncertainty, analysts point out that "countries that need access to financial markets to refinance foreign currency debt, and, more generally, who are heavily indebted to foreign private investors, must find prohibitive conditions, at least in the short term ".
In analyzing this type of country, in which Angola stands out, with a public debt to GDP ratio above 100 percent and with a strong dependence on markets for financing and oil for tax revenues, Moody's warns that " if the risk aversion environment remains for a long period, credit metrics such as external vulnerability, debt and debt sustainability are also expected to deteriorate significantly ".
For Moody's, "debt-issuing countries rated below the investment recommendation, and with a large amount of foreign currency debt to private creditors, such as Bahrain, Oman and Angola, are particularly vulnerable", since "even though access to financing from development partners can mitigate this risk, resources are limited ".
Based on public debt to GDP, which the International Monetary Fund (IMF) says is above 100 percent of GDP, these three countries "are at the highest level of risk from a strong and prolonged lack of appetite on the part of investors. "and inflows of investment flows, also warning that the amount of debt in foreign currency exceeds the size of international reserves.
In recent weeks, Moody's has released several analyzes on countries that face several external shocks simultaneously, placing Angola among the most affected, not only by the heavy dependence on oil, whose prices are at the lowest of the century, but also by the exposure to fluctuations in international markets, all of which is exacerbated by the uncertainty caused by the spread of covid-19, which several analysts say has already put the world into an economic recession.
On Friday, the Angolan Finance Minister described the drop in oil prices as "dramatic" for the country and reviewed the growth forecast for this year, now estimating a 1.2 percent recession, the fifth consecutive year contraction of the economy.
