Rating agency Standard & Poor’s maintained its rating for Angola at “B” and the outlook negative over the next 18 months despite the likely increase in the price of oil, according to a note sent to investors.
The “B” credit rating indicates that the issuer is able to meet its financial obligations but adverse economic and financial conditions are very likely to have a direct involvement in the ability or willingness to honour those committments.
In the document, the agency points out that Angola’s economy may have grown 0.5% in 2016 and accelerate this year to 1.4%, figures that are insufficient for it to change its outlook for Angola.
“The negative outlook reflects concern about excessive external and fiscal deficits, which may exceed our current predictions, especially if the government increases spending faster than the rise in oil revenues,” write the analysts.
Standard & Poor’s revised the outlook for the budget deficit last year, now anticipating a slight improvement from 5.5% to 5%, “due to stronger control of spending” than anticipated in August 2016.
The deficit in 2017, which the Angolan government plans to keep at 5%, has room to “accommodate the expenses related to the August elections,” but these values will go down to around 2% by the end of 2020, according to S&P.