Azerbaijan, Baku, Oct. 4 / Trend A.Akhundov /
Credibility of Azerbaijan is supported by low government debt, its sustained fiscal surpluses and strong net creditor position due to sizable foreign assets that it has accumulated ($45 billion, or 66% of GDP, as of end-2012), Moody's annual credit report said.
These factors that reflect Azerbaijan's Baa3 foreign and local-currency bond ratings with a stable outlook will help to shield the economy from internal and external shocks.
"Hydrocarbon-rich Azerbaijan has been one of the fastest growing economies over the past decade because of the strong expansion in its oil and gas extraction industry, and surging oil and gas prices. Moreover, the rise in oil-related revenue has enabled the government to generate fiscal surpluses and to significantly invest in the country's infrastructure, thereby transmitting the positive effects from the oil sector to the broader economy. As a result, Azerbaijan's poverty levels have dropped significantly, limiting the likelihood of domestic political and social unrest," the report said.
Moody's notes that the overall economy continues to rely heavily on the oil sector despite falling oil output and the brisk economic expansion in non-oil GDP. The rating agency believes that this is unlikely to change in the short to medium term.
According to the information, significant improvements in the country's institutional strength and continued and sustained economic diversification could exert upward pressure on Azerbaijan's ratings. Conversely, downward pressure could develop in the event of significant deterioration in the domestic or regional political environment that could result in severe disruptions to oil production or foreign investment in the economy.