Recently implemented wide-reaching reforms in the Angolan economy are already having a positive effect as they convinced S&P analysts to maintain the country’s credit rating at B- despite challenges in 2019.
Ravi Bathia, S&P’s team leader for Angola, stated that it was President João Lourenço’s “impressive economic reform program and budget caution” that helped balance the evaluation of Angola’s credit rating.
However, the considerable increase in government debt in 2018 and 2019, greatly influenced by the depreciation of the Kwanza, and the decline in oil production, forced the agency to review the country’s outlook from stable to negative.
“The negative outlook reflects the possibility of a drop, if the high level of public debt makes financing needs unsustainable or if budgetary or external pressures lead to twin deficits that are bigger than expected,” the agency said in a statement.
Angola’s national debt has witnessed a considerable increase since the oil price crisis of 2014 rising from 30% then, to 88.6% in 2018 and 103% in 2019. The agency expects, however, that the debt level will stabilize, partly due to the newly implemented reforms that should improve the business environment and promote investment.
S&P expects that the Angolan economy will register a 1% growth in 2020, breaking free from a three-year recession and leading to a 1.5% growth in 2021, 2.1% in 2022 and 2.5% in 2023. These predictions have already factored in the relatively lower price of oil registered in 2019, which means they would be revised upwards if the price of oil climbs back up.
The agency expects the government’s macroeconomic reforms, supported by an International Monetary Fund program, to improve and expand the country’s economy, which should help to contain budget deficits and stabilize forex reserves in the coming years.