"Angola's rating balances weak governance indicators, high inflation, high levels of public debt in foreign currency and one of the highest levels of dependence on raw materials among countries classified by Fitch, with external reserves greater than its peers, current account surpluses and manageable debt risks", reads the note accompanying the decision to maintain the rating at B-.
In the note sent to investors on Friday night, Fitch Ratings predicts a rise in inflation, from 13.8 percent this year to 24.5 percent next year, before slowing to 16.6 percent in 2025, and slight economic growth of 0.2 percent this year, which will rise to an average of 1.2 percent between 2024 and 2025.
The rise in prices is due to the depreciation of the kwanza and the implementation of the reform of fuel subsidies, says Fitch Ratings, which also predicts a strong slowdown in economic growth, after growth of 3 percent in 2022.
"The weaker growth reflects the slowdown in oil production, which is expected to fall to an average of 1.09 million barrels per day this year and 1.05 million in the next two years, when in 2022 daily production was 1,14 million barrels", say analysts.
Weak economic growth and high inflation, coupled with the scarcity of foreign currency, will have a significant impact on consumption and imports of goods, which will slow down non-oil activity and mean that "Angola's growth will remain below the average of 3.3 percent that is predicted for the average of B-rated countries in 2024 and 2025".
The debt, they point out, is expected to increase to 80.5 percent of GDP at the end of this year, worsening compared to 60.5 percent in 2022, "mainly due to the impact of the depreciation of the kwanza on the high level of debt in foreign currency, but the ratio will fall to 70 percent and 66.7 percent in 2024 and 2025, reflecting growth in nominal GDP and primary budget surpluses", says Fitch, concluding that, despite this improvement, Angola will continue with a public debt ratio above the 54.4 percent average estimated for countries with a level B rating.
Fitch analysts point out that the debt repayments expected for this year will be 5.6 billion dollars, plus 5 billion dollars next year and 6 billion dollars in 2025, which compares with payments of 4.8 billion dollars made last year.
"Debt repayments will be made through a combination of disbursements from bilateral and multilateral sources, use of government deposits and liquidity in accounts related to loans to China, which use oil as collateral", concludes Fitch.
Anticipating robust international reserves of 14.5 billion dollars at the end of this year, which are expected to increase to 15.2 billion dollars in 2025, Fitch Ratings writes that these amounts imply import reserves of 5.7 months, well above the average of 3.3 months for countries classified as B.
