Moody’s: impact of economic and financial risks on Azerbaijan’s rating is quite low
Baku, Fineko/abc.az. International rating agency Moodys Investors Service has published an opinion on the credit rating of Azerbaijan, pointing out that the country’s current long-term ratings in national and foreign currency are both at Ba1.
In agency’s opinion, given the countrys large oil and gas reserves, Azerbaijans medium-term economic growth potential is strong although a lack of economic diversification could hinder growth in the long term if not addressed.
“Financial robustness is ranked high, with government debt ratios expected to remain low in the medium term. Azerbaijan runs a large current account surplus, which is estimated at 27.2% in 2011, slightly below its 2010 level of 29% as a result of a temporary disruption in oil production. The governments State Budget usually targets a modest deficit in the governments financial balance (1.5% of GDP in the 2012 State Budget) as part of an active policy to develop the countrys domestic capital market.
The consolidated budget however, (which includes the State Oil Funds - SOFAZs - revenues) usually registers sizeable surpluses which for 2011 is estimated at 9.8%. Azerbaijans susceptibility to event risk is considered to be moderate, largely due to political risks reflecting geopolitical tensions with the autonomous region of Nagorno-Karabakh and its supporter, Armenia. Economic and financial event risks, on the other hand, are both ranked very low,” the Agency reports.
Moody’s points out that the outlook on the governments bond ratings is positive which reflects our expectations of further improvements in Azerbaijans already strong government finances as well as the countrys institutional capacity supporting the prudent management of its oil windfall.
“The ratings could come under upward pressure if the governments economic plan increases diversification and the country continues to accumulate foreign currency reserves. The ratings could also be positively influenced if there is tangible progress towards resolving the conflict in the Nagorno-Karabakh region. Downward rating pressure might occur if there were to be a significant deterioration in the domestic or regional political environment or a prolonged period of fiscal deterioration as a result of a sustained drop in global oil prices,” it was informed.
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