In Angola, the recession is worsening. Real GDP shrank by -7.4% y/y in the second quarter. The economy is constrained by a widespread credit crunch since the government delayed payments in order to limit its own liquidity risk (multi-year arrears to local corporates are above USD5bn). As a result, non-performing loans have skyrocketed to 28% of total loans. The difficulties of banks are intertwined with the problems of the government and SOEs (which are the banks’ shareholders). Foreign currency liquidity has also weakened, as (i) the import cover of foreign reserves fell to a new low of 4 months in September and (ii) the short-term debt due to reserves ratio increased to 70%. Financing is still trapped in a blind run, using bilateral financing of long-term infrastructure gaps in order to fund short-run liquidity needs instead of more appropriate financing (e.g. an IMF loan). The evidence is that Angola is currently experiencing a hard landing. GDP is forecast to contract by -5% in 2018 (after -2.6% in 2016 and -2.7% in 2017).
