The consultancy Fitch Solutions today revised down its forecast for bank lending growth in Angola this year to 6%, due to problems in the oil sector, recovering from the 1.3% contraction in 2022.
“At Fitch Solutions, we anticipate that bank loan growth will grow 6% this year, after a 1.3% contraction in 2022; although we had previously forecast that credit growth would accelerate from 5.5% in 2021 to 9% in 2022, data recently released by the National Bank of Angola show that loans actually fell by 1.3% in 2022,” announce the analysts of this consultancy owned by the same owners of the financial rating agency Fitch Ratings.
In the note on credit developments for this year, sent to investors and to which Lusa had access, Fitch Solutions writes that the data “reflect the acceleration in the prime lending rate from 19.4% in 2021 to 20.1% in 2022, which has put pressure on liquidity in 2022, reducing the funds immediately available for lending” to clients in Angola.
“We anticipate that loan growth will recover to 6%, below our previous forecast of 8%, following low base effects and a rise in credit demand from private consumers and businesses,” they add.
Fitch Solutions underpins the forecast increase in credit demand on the improvement in inflation to 11.3% by the end of this year and a reduction in the key interest rate to 17%, which will “ease pressure on purchasing power and encourage more spending by households and businesses, as there will be an increased incentive to borrow to finance large household purchases and business projects.”
On the other hand, notes Fitch Solutions, problems in the oil sector will limit the rise in bank lending in 2023, as the state is expected to offset the reduction in tax revenue via oil through increased reliance on domestic bank financing.
“We anticipate that the oil price will fall 4.1% this year, to an average of $95 a barrel, and that oil production in Angola will fall 2.7%, so we assume a gloomier outlook for investments in Angola’s oil sectors, as there will be less demand for credit from the oil sector and associated industries,” the note reads.
At the same time, they said, “the government will have to increase its indebtedness with national banks to finance its expenditure, since it will have less oil revenue, which is worth more than 50% of total tax revenue.
As banks are traditionally more comfortable lending to the State than to companies, which have a default rate above 20%, “the increase in credit to the Government in 2023 will crowd out loans to the private sector,” conclude the analysts.