Financial rating agency Fitch Ratings forecasts economic growth for Angola of 2.7% this year and 2.5% in 2024, when public debt is expected to stand at 54.5% of GDP.

"Fitch estimates that Angola's real Gross Domestic Product (GDP) growth has accelerated from 0.7% in 2021 to 3.1% in 2022, mainly due to the robust performance of the non-oil economy, but also due to the return to positive growth in the oil sector; we forecast economic growth to slow to 2.7% this year and 2.5% next year, mainly due to a decline in production," says Fitch Ratings.

In the note accompanying the announcement of the decision to keep the rating at B- and improve the outlook to positive, Fitch analysts write that "activity in sectors other than oil should remain robust, reflecting government spending on diversification efforts and falling pressures on inflation".

Fitch estimates that inflation fell from 28.8% in 2021 to 22.2% last year, "sustained by an appreciation of the kwanza and the strengthening of the weight of food in the basic food basket (to 55%), and should decelerate further to an average of 14% in 2023 and 11% next year."

The fall in the price of oil compared to last year, influenced by the impact of the war in Ukraine, should turn the current account balance negative, with figures of -0.8% and -1% in 2023 and 2024, compared to a surplus of 1.7% last year.

"This is due to the decline in government revenue to 21.1% of GDP in 2023 and 19.3% in 2024, compared to an estimated 23.6% in 2022, the highest level since 2015, with oil prices falling from 100 dollars per barrel last year to 85 and 65 dollars this year and next," the analysts write.

Public debt, on the other hand, is expected to continue the downward trajectory it began in 2021, falling from 77.4% that year to 60.3% last year and 54.4% next year.

"The fall in the debt-to-GDP ratio in 2022 was mainly driven by the substantial appreciation of the kwanza, and we expect the further decline until 2024 to be underpinned by strong nominal GDP growth and primary budget surpluses," i.e. a positive balance in the public accounts before interest on the debt is calculated.

Despite the improvement, risks remain, the analysts warn, noting that "the average maturity of external debt increased to 10 years at the end of 2021, when in 2018 it was five years", which means that interest will have to be paid for longer, and around 80% of the debt is external, Added to this is the fact that "interest is high relative to its peers, with the ratio of revenue to debt standing at 17% in 2022, well above the average" of the countries that Fitch rates B, which use 11.5% of their revenue to service their debt.

As far as the government's ability to implement public policies is concerned, Fitch considers that the MPLA's victory in August last year guarantees continuity, and does not expect difficulties in governance.

"The majority achieved by the MPLA and the peaceful return to parliamentary activity should guarantee political stability in the coming years," the analysts write, concluding that "although fiscal consolidation may become more challenging with the increase in social pressures after five years of recession, no policy changes are expected by the new government."

Fitch Ratings today upgraded Angola's rating outlook to positive, maintaining its opinion on sovereign credit quality at B-, below the investment recommendation.

"The positive outlook reflects the recent sharp fall in public debt, large current account surpluses and lower financing risks, underpinned by a more favorable oil environment," reads the note accompanying the decision to maintain the rating at B-, two levels below the investment recommendation, i.e. 'junk', as it is generally called. (Lusa)