Azerbaijani banking system affected by global financial crisis to a lesser extent: Moody's

Business Materials 12 June 2009 16:50 (UTC +04:00)

Azerbaijan, Baku, June 12 / Trend , N.Ismaylova /

Azerbaijani banking system has been affected by the global financial crisis to a lesser extent than other countries in the Commonwealth of Independent States (CIS) region or in Central and Eastern Europe (CEE), says Moody's Investors Service in a new Banking System Outlook.

The agency explains it through predominantly domestic focus and lower level of foreign borrowings compared to other CIS countries.

The reports says that the medium-term credit outlook for the Azerbaijan banking system is negative, reflecting recent developments in the Azerbaijani banking sector.

The outlook takes into account Moody's concerns that the deceleration in Azerbaijan's economic growth, the weakening operating environment coupled with funding constraints are likely to adversely affect banks' asset quality, liquidity and ultimately capitalisation.

Moody's negative outlook for the Azerbaijani banking system expresses the rating agency's view on the likely future direction of fundamental credit conditions in the industry over the next 12 to 18 months. It does not represent a projection of rating upgrades versus downgrades.

The report says that in recent years, Azerbaijan gained considerable advantage from its status as an oil-based economy, fully benefiting from the high oil prices. This, coupled with the government's efforts to diversify and expand the non-oil segment of the economy, has contributed to the rapid growth of the country's banking sector.

"Indeed, against the background of the oil boom, the Azerbaijani economy has recorded double-digit GDP growth since 2003 (10.8% in 2008). However, slower economic growth is forecast for 2009 due to the impact of the significant decline in oil prices that started in H2 2008," says Lev Dorf, a Moody's Associate Analyst and author of the report.

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