According to the economic analysis of the country, released following the downgrade of the rating last week, analysts write that "Angola's credit profile is hampered by the weak institutional framework and continued deterioration of debt metrics, with public debt likely to reach 120 percent this year".
Moody's warns that Angola "remains vulnerable to further currency depreciation" and further writes that "credit metrics are likely to deteriorate significantly due to the strong negative impact of the oil shock and the new coronavirus pandemic".
Last week Moody's completed the process of reviewing Angola's rating, downgrading its opinion on the credibility of the country's long-term sovereign debt, issued in local and foreign currencies, from B3 to Caa1, and changing the outlook to stable.
Moody's justified the decision to downgrade the rating with "the shocks resulting from the sharp drop in oil prices and the pandemic of the new coronavirus and the related worsening of the currency devaluation".
These factors "contributed to a significant weakening of the country's already weak public finances and fragile external position," added the analysts.
For Moody's, the shift from perspective to stable means that credit risks to Angola are "adequately reflected in the current Caa1 rating.
Both B3 and Caa1 ratings belong to a non-investment grade, whose scale down goes from Ba1 to C. Bonds rated Caa (1, 2 or 3) are considered to be of poor quality and subject to very high credit risk as defined by the rating agency.
