BAKU, Azerbaijan, November 17. S&P Global Ratings forecasts the volume of non-performing loans (NPLs) in the Azerbaijani banking sector in 2022 at about 4.5 percent, which is slightly higher than the 3.5 percent expected in mid-year, Trend reports via the agency.
According to the report, the volume of NPLs is expected to fall to 4 percent in 2023.
“In our base case, credit costs will remain elevated in 2022 and beyond, reflecting lower real disposable income of households and small and midsize enterprises (SMEs) because of higher inflation,” the agency said.
Furthermore, S&P expects that loan losses will remain within 0.5-1 percent of the average loan portfolio in 2022-2023, which is well below historical cyclical levels.
“The banking sector has been more resilient to macroeconomic challenges than expected in recent years, particularly credit costs and asset quality metrics. Nevertheless, we believe that easing economic risk in Azerbaijan is cyclical rather than structural, supported by favorable commodity prices and better business dynamism,” S&P noted.
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