"At Fitch Solutions, we anticipate that credit growth in Angola will slow to 4 percent from 26.9 in 2019, due to weak demand and the reluctance of banks to approve new loans," reads a note on the projected evolution of the banking sector in Angola.
In the document, sent to clients and to which Lusa had access, the analysts of this consultancy, owned by the same owners of the financial rating agency Fitch Ratings, write that "the degradation in the quality of assets will reduce profits, while the strong currency depreciation in a context of strong currency exposure in the sector will influence the banks' capital".
In the report, Fitch Solutions forecasts an acceleration of credit growth to 7 percent by 2021, as well as an improvement in profits, but warns that "weak household demand for credit and poor asset quality will continue to pose challenges to the banking sector.
Non-performing loans, i.e. loans that are not paid for by customers, rose from 32.7 percent in January to 34.5 percent of total loans in a context of "falling income and corporate profits, which weighed on customers' ability to pay their debts.
This, Fitch Solutions predicts, will make the banks favor the public sector, showing reluctance to lend to the private sector.
Fitch predicts a drop in Angola's Gross Domestic Product (GDP) of 4 percent this year, recovering to a growth of 1.7 percent in 2021, sustained by an increase in private consumption and exports, but even so the growth of banking activity will remain below the average of 9.2 percent recorded between 2012 and 2019.
"GDP growth will continue below population growth of 3.2 percent, which means per capita GDP will continue to fall, and this will limit households' demand for credit, and then because although non-performing loans will encourage the issuance of new loans, these types of loans will continue to be close to or above 30 percent of the total, which implies increased caution on the part of banks," conclude the analysts.