BAKU, Azerbaijan, Feb.8
By Leman Zeynalova – Trend:
Moody’s expects deposit dollarization to decrease in Azerbaijan in 2022, Trend reports.
“Deposit dollarization in Azerbaijan (Ba2 positive) fell to around 50 percent in 2021 from 56 percent in 2020 and 65 percent in 2018. It will likely to drop below 50 percent by the end 2022, supported by a stable local currency and strengthened macroeconomic conditions thanks to the higher price of oil, its main export,” reads the latest report released by Moody’s.
However, the report says that depositor confidence in local currency is weak and any further decline in dollarization will likely be limited.
“Higher export revenues will also likely mean an increase in corporate foreign-currency deposits. A further concern is that the level of foreign-currency loans remains high at around 26 percent and many are issued to borrowers without a foreign-currency revenue source, raising the risks of loan losses if the manat depreciates,” said Moody’s.
Nevertheless, the Central Bank of Azerbaijan continues to peg the currency firmly at 1.7 manat to the dollar, which will support both depositor confidence and the quality of unhedged foreign-currency denominated loans, reads the report.
“Higher oil prices and a recovery in exports will likely lead to a current-account surplus, which will bolster the local currency. The country's large sovereign wealth fund can also be used to absorb external shocks, in the event of a sharp drop in oil prices,” said Moody’s.
---
Follow the author on Twitter: @Lyaman_Zeyn