NEW YORK – Fitch Ratings on Wednesday revised its sovereign credit outlook on oil-producer Angola to positive from stable, citing its government’s better understanding of the commodity price cycle and more prudent monetary and fiscal policymaking.
In addition, Fitch affirmed the current speculative grade rating of BB-minus, which is equal to the BB-minus assigned by Standard & Poor’s and Ba3 by Moody’s Investors Service. However, Fitch’s positive outlook now contrasts with that of its rivals, who view the nation’s ratings as stable.
Angola is Africa’s second biggest oil-producer after Nigeria.
“The revision of Angola’s outlook to positive reflects the country’s prudent economic policies which have helped rebuild and strengthen public and external balance sheets. These measures should ensure that Angola is less vulnerable to an adverse oil price shock,” Carmen Altenkirch, sovereign credit analyst at Fitch said in a statement.
Altenkirch said if the government adds to its track record of instituting reforms along with stronger economic performance, there will be upward pressure on the ratings. Angola is three notches below investment grade.
More improvements however are needed in the regulatory, governance and respect for rule of law spheres, Fitch said. It also highlights stubborn inflation due to high transportation costs and high levels of imports.
However sound monetary policy and more conservative fiscal policy have helped lower inflation and reduce its volatility, the firm said.
“Poor governance and corruption remain major impediments to addressing Angola’s developmental challenges and an important constraint on the rating,” the firm said.
Angola will hold parliamentary elections on August 31 and is likely to confer another term in office for President Jose Eduardo dos Santos, its leader for the last 32 years.
This will only the second election in Angola after the end of a 27-year civil war ended in 2002.
Dos Santos’ MPLA won the civil war against rebel group UNITA and then crushed its rivals in a 2008 election, obtaining 82 percent of the votes.
Since then dos Santos has tightened his stranglehold on power under a 2010 constitution that eliminated a direct presidential vote and made the head of the winning parliamentary party president. He is Africa’s second-longest serving ruler after Equatorial Guinea’s Teodoro Obiang Nguema Mbasogo.
Fitch did say it is concerned about a new investment law meant to promote the non-oil sector of the economy.
“The new law aims to attract investment to certain under developed sectors. However, there is always a danger that focused industrialization strategies, where governments try to ‘pick winners’, will not have the desired effect on investment or allocates resources inefficiently,” Fitch said.