BAKU, Azerbaijan, July 25. Azerbaijan’s state budget surplus is expected at 6 percent of the GDP, Trend reports, citing S&P Global Ratings.
According to the agency, this is an upward revision, compared to the previous forecast of 3 percent of the GDP, “almost entirely reflecting more favorable oil price dynamics”.
“Azerbaijan's fiscal asset position remains strong, mirroring its external position and supporting the sovereign rating. Despite the budgeted 2021 deficit, Azerbaijan posted a full-year general government surplus of 6.6 percent of GDP. In 2021, the general government balance improved as terms of trade proved more favorable than in 2020,” the report said.
As S&P noted, according to the latest budget revision, total government spending should increase by more than 20 percent in nominal terms compared to the actual outflow in 2021, as social spending and public sector wages increase in addition to capital expenditures.
“The 2022 budget was revised in July with the oil price now assumed at $85 per barrel (versus $50 per barrel previously) and an increase in capital expenditure, allowed by better revenue outturns,” the report noted.
Also, S&P expects the net general government asset position of Azerbaijan to remain about 40 percent of the GDP through 2025.
“In calculating net general government debt, we consider our estimate of SOFAZ's external liquid assets. We exclude exposures equivalent to about 20 percent of 2021 GDP that we consider harder to liquidate quickly if needed, such as the fund's domestic investments and certain equity exposures abroad. Azerbaijan is far more transparent than many of its peers (such as those in the Gulf Cooperation Council) with regard to the composition of the assets and size of the sovereign wealth fund. For example, SOFAZ publishes detailed audited annual reports with granular information on the categories of investments held by the fund,” the agency added.
In addition, according to the agency, Azerbaijan's GDP growth in 2022 is projected at 3.5 percent, after a strong rebound of 5.6 percent in 2021.
Meanwhile, S&P Global has affirmed its 'BB+/B' long- and short-term foreign and local currency sovereign credit ratings on Azerbaijan with a stable outlook.
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