Azerbaijan, Baku, Dec. 21 / Trend /
Standard & Poor's Ratings Services said today that it affirmed its 'BB+/B' long- and short-term sovereign credit ratings on the Republic of Azerbaijan, the agency's report publicized on Tuesday reads. The outlook remains positive. The transfer and convertibility assessment remains at 'BBB-'.
"The affirmation reflects our expectation that Azerbaijan's public sector net asset and international investment position will strengthen, and that general government debt will remain moderate on the back of expected budget surpluses," Standard & Poor's credit analyst Luc Marchand said.
The ratings are supported by the presence of a substantial resources endowment, fiscal and external buffers, and strong economic growth prospects.
Good prospects for oil production and exports are likely to maintain surpluses in the current account and consolidated budget position over the next few years.
"Given an expected quasi-flat oil production in 2011 and small increase in 2012, and the expected increase in oil prices to about $86 per barrel in 2011, the current account surplus should remain high at an average of more than 20% of GDP in 2011-2012," the report reads.
Standard & Poor's believes stronger FDI flows in the sector should keep production increasing beyond 2012-2013. Despite the global slowdown, we estimate that output growth will remain close to 4.0% in 2010 and 2011, and expect it to accelerate gradually to 5.0% in 2012-2013 on the back of higher non-oil sector growth as the economy remains buoyed by hydrocarbons revenues.
"The positive outlook reflects our expectation of a further strengthening of Azerbaijan's external and fiscal balance sheets through twin surpluses on the budget and current accounts. Such a development could support a rating upgrade to investment grade during 2011. A significant improvement in the business environment, an acceleration of structural reform and economic diversification efforts, and a strengthening of monetary policy and the banking system could also lead to an upgrade," the report reads.