Baku, Azerbaijan, Dec. 5
By Azad Hasanli - Trend:
Moody's Investors Service ("Moody's") has affirmed Azerbaijan's Baa3 government bond and issuer ratings, the message of the agency said Dec.5.
The outlook remains stable, according to the message.
The key factors for affirming the Baa3 rating and maintaining the stable outlook first include Azerbaijan's fiscal resilience, supported by the State Oil Fund of the Republic of Azerbaijan's (SOFAZ) large assets, which amounted to $34.7 billion (or 64 percent of GDP forecast for 2015) at late September 2015, at more than 60 percent of GDP, and Moody's expectation that the country's government debt-to-GDP ratio will stabilize in 2016 at below 25 percent, said the message.
Second, the key factors include the country's sizeable fiscal buffers and the employment of a more flexible exchange rate, which will allow Azerbaijan to mitigate the impact of lower oil prices on the economy, the agency said.
Moody's expects Azerbaijan to be financially strong enough -- absent a further significant decline in oil prices -- to preserve its creditworthiness during the economic and fiscal adjustment process to lower oil prices.
The rating agency expects Azerbaijan's budget deficit to narrow to 5.5 percent of GDP in 2016, compared with its 2015 forecast of a 9.2 percent deficit. Looking beyond 2016, the government's debt burden will likely decline due to gradually decreasing fiscal deficits and a stabilising economy, said the agency.
Moody's forecasts that Azerbaijan's real GDP growth rate will slow to 1.7 percent in 2016 from 2.8 percent in 2015, but expects it to accelerate to around 3 percent over the period 2017-2019 against the backdrop of a fading oil price shock.
Upward pressure could be exerted on Azerbaijan's government bond ratings following significant improvements in the country's institutional strength, evidence of sustained economic diversification and/or a decrease in geopolitical risks, Moody's said.