BAKU, Azerbaijan, June 10. S&P Global Ratings has confirmed Azerbaijan's long-term and short-term sovereign credit ratings in foreign and national currencies at "BB+/B" with a stable outlook, Trend reports.
Favorable hydrocarbon prices are expected to support Azerbaijan's financial position and balance of payments next year, despite the projected medium-term decline in oil production.
At the same time, S&P can consider the possibility of upgrading the rating, if Azerbaijan maintains a higher external surplus for a longer period than we expect, leading to a significant accumulation of additional external assets.
"Rating upgrades could also occur if the government implements reforms aimed at addressing certain structural impediments, including the undiversified nature of the economy and constraints on the effectiveness of monetary policy," the agency said.
According to analysts at the agency, Azerbaijan's strong fiscal and external reserves are key supports for its sovereign ratings.
The government has accumulated significant liquid assets, primarily through the State Oil Fund of Azerbaijan Republic (SOFAZ). Thus, the agency forecasts that the government will have access to liquid assets amounting to around 55 percent of GDP by 2026, and the gross general government debt will gradually decline to 17 percent of GDP by 2026 from 19 percent of GDP at the end of 2022.
In addition to existing strong reserve positions, favorable oil prices are also expected to support Azerbaijan's budget and balance of payments indicators. However, Azerbaijan's economy remains heavily reliant on the oil and gas sector, which accounts for nearly 50 percent of the country's nominal GDP, S&P noted.