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Fitch revises Azerbaijan's credit outlook to 'stable'

Macroeconomic stability improved in Azerbaijan last year after two years of turmoil, ratings agency says

  | 03.02.2018
Fitch revises Azerbaijan's credit outlook to 'stable'

By Ovunc Kutlu


International ratings agency Fitch has revised Azerbaijan's credit outlook to "stable" from "negative" while affirming its credit rating at 'BB+'.

After two years of turmoil, macroeconomic stability improved in Azerbaijan last year, it said in a statement released Friday.

With the gradual recovery in oil prices in addition to tight fiscal and monetary policies, Azerbaijan's exchange rate has stabilized around 1.70 to the U.S. dollar since April 2017, Fitch said.

"This has in turn helped ease pressure on inflation which although at 12.9% on average in 2017 has reduced on a month-on-month basis since April 2017," the statement said.

"Fitch expects the currency to remain broadly unchanged over the coming two years, based on stable oil price assumptions," it added.

With higher oil prices, Azerbaijan's current account balance has turned to a surplus since the second quarter of last year, Fitch said, adding that it estimates the surplus reaching 3.1 percent for the full year of 2017.

Assets in the State Oil Fund of Azerbaijan (SOFAZ) have also increased from $33.1 billion in 2016 to $35.8 billion at the end of 2017 -- equal to 87.4 percent of gross domestic product last year.

However, Fitch warned that the economy is highly dependent on commodities, and this is unlikely to change.

"Given the expected rise in gas exports upon completion of the Southern Gas Corridor project, commodity dependence will remain particularly high," the statement said.

"Prospects for meaningful diversification of the economy, although on the authorities' agenda through the 'strategic roadmaps' initiative, appear remote," it added.

Fitch also warned that disruption in macroeconomic stability and weaker growth could lead to a negative rating action, while improvement in economic diversification and the business environment could pave the way for a positive rating action.

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