Fitch downgrades Angola to ‘B’, outlook negative
Fitch Ratings has downgraded Angola’s long-term foreign and local currency issuer default ratings (IDR) to ‘B’ from ‘B+’. The outlooks are negative.
The issue ratings on the country’s senior unsecured foreign currency bonds have also been downgraded to ‘B’ from ‘B+’. The country ceiling has been revised down to ‘B’ from ‘B+’, and the short-term foreign and local currency IDRs have been affirmed at ‘B’, Fitch said in a statement.
The downgrade of Angola’s IDRs reflected various key rating drivers and their relative weights, including that Angola continued to suffer from a severe oil shock – oil accounted for over 95 percent of total export revenue and around 50 percent of government revenue – leading to a sharp worsening of macroeconomic, fiscal, and external metrics.
Sustained pressure on the balance of payments had led the authorities to restrict foreign currency availability, creating a severe liquidity shortage. Between January and August, the National Bank of Angola (BNA) sold only around US6bn in the domestic market, compared with over US12bn in the same period in 2015, contributing to a sharp widening in the parallel market.
Consumer price inflation reached 38 percent in August 2016 owing to the sharp depreciation of the currency and a strong pass-through effect. Fitch expected it to average over 30 percent in 2016, compared with the ‘B’ median of 4.5 percent.
Fitch forecast the fiscal deficit to widen from 3.8 percent of GDP in 2015 to 5.8 percent of GDP in 2016, despite significant expenditure reforms, which only partially offset the impact of lower oil revenues.
As a result of currency depreciation, GDP per capita in Angola was expected to fall to US3000 in 2016, the lowest level in a decade and below the ‘B’ median of US3500. Moreover, the economic situation had compounded Angola’s weak institutional and policy capacity, as evidenced by the outbreak of malaria and yellow fever epidemics in 1H16, the ratings agency said.