Azerbaijan, Baku, 29 February /corr. Trend I.Khalilova / On 29 Feb, Fitch Ratings affirmed the Republic of Azerbaijan's Long-term foreign and local currency Issuer Default ratings (IDR) at 'BB+', Short-term foreign currency IDR at 'B' and Country Ceiling at 'BB+', the Agency's statement says. The Outlooks for the Long-term IDRs are Stable.
" Azerbaijan's rating is supported by strong and sustainable economic growth, low government and external debt ratios and a large current account surplus, underpinned by rapidly rising oil and gas production," says Eral Yilmaz, Associate Director in Fitch's Emerging Europe sovereigns group.
The statement says that real GDP growth was 25% in 2007 and Fitch estimates growth of 16% in 2008. The Agency considers that the Azeri government's share of profits from oil and gas projects as well as transit and acreage fees accrue to the State Oil Fund, which had accumulated assets equivalent to 8% of GDP in 2007. Fitch expects this figure to rise to 13% of GDP in 2008.
Azerbaijan is, however, facing rising inflationary pressure as a result of an accommodating monetary policy in the face of the positive terms of trade shock from the development of the energy sector and high oil prices. With limited nominal appreciation of the Azeri New Manat (AYM) under the central bank's managed float exchange rate regime, Fitch estimates the year-on-year inflation rate rose to 17% in December 2007 from 11% in December 2006.
In assessing the Azerbaijan, the Fitch experts took into consideration the several economic parameters, especially political stability, sustainable and dynamic rate of GDP growth, the level of governmental external and internal debts, high liquidity, stable monetary policy, oil revenues, ensuring transparency of budget expenditures, reduction of poverty level, as well as the implementation of several large-scale projects.