Fitch and Moody’s degrade the note of Congo – Brazzaville – Jeune Afrique

 In their reports, both rating agencies highlight the deterioration of public accounts as a result of the decline in oil prices.

Moody’s and Fitch rating agencies have lowered the March 4 the sovereign rating of the Republic of Congo. Moody’s lowered the long-term rating of the country “B +” to “B”, while Fitch has reduced from “Ba3″ to “B1″. If in both cases, the decline is only a notch, the decision of Fitch tipped the country rating in the bond category called “ highly speculative “. Fitch was previously the latest international rating agency to keep the note of Brazzaville in the top category called “ Non-investment grade speculative “, considered less risky. Both agencies have placed the note on negative watch countries.

In their report, Moody’s and Fitch explained their decision by the deterioration of macroeconomic indicators of the country in the wake of the fall of oil prices, which 69% of government revenues and 80% of exports. While a barrel of crude is trading around $ 30, against $ 50 on average in 2015 and about $ 100 mid-2014. Moody table’s on a barrel to 33 dollars in 2016 and 38 dollars in 2017, when Fitch table on 35 dollars and 45 dollars respectively.

Public debts and degraded fiscal balances

“Finance government of the Republic of Congo are particularly sensitive to the oil price decline due to two interrelated factors: first, because it represents a particularly large share of public revenues (69% in 2014); and secondly, because of the prevalence clauses ‘super profits’ in contracts used in the oil sector of the country, which means that revenue [public] from oil are particularly sensitive to price changes, “says Moody’s.

He believes that, as a proportion of GDP, the country’s public debt (net of currency deposits) deteriorated by 13 percentage points in 2014 and 27 points in 2015. the agency new York-based anticipates a further deterioration of 20 points in 2016. the country’s debt is expected to reach 48% of GDP in 2017, according to the agency.

the two agencies also anticipate the deterioration of the fiscal balance from the country. The deficit will be 13.4% in 2016. Fitch believes that shows particular reservations about the government’s desire to reduce its accounts. And point, for example, that the budget 2016 provides for a 15% increase in wages and capital spending compared to 2015.

For Fitch, the economic outlook “remains positive”

If, like Moody’s, Fitch placed the rating of Congo – Brazzaville watch negative, the agency believes that in the medium term, the economic outlook “remains positive”. The agency based in London and New York, for example, notes that “non-oil activity (still dominated by public investment) has maintained the real GDP growth in the green at around 2% in 2015, despite lower oil production. “

Fitch also notes that major oil fields” will be commissioned in 2016-2017, which could significantly increase oil production, and none of these projects n has been canceled so far. “

Finally, the report says Fitch,” the country has untapped mineral potential and significant focus by the government on economic diversification could contribute to support medium-term non-oil growth “

.