Standard & Poor’s Confirms Ratings of Azerbaijan at Level of BB + / B; Forecast Negative

The international rating agency S & P Global Ratings confirmed the long-term and short-term sovereign credit ratings of Azerbaijan in foreign and local currency at the level of BB + / B.

The outlook on the ratings is Negative.

On the official website of the agency it is noted that the institutional system of Azerbaijan is ineffective.

“In addition, the country's economy is still adjusted in accordance with the weak external economic conditions and pressure on the balance of payments is maintained,” the report said.

The agency's experts stressed that the government fiscal position remains strong due to significant foreign exchange reserves in the country's national welfare fund - the State Oil Fund of Azerbaijan (SOFAZ).

According to agency’s experts, the "negative" outlook reflects the risk that in the next 6-12 months, foreign trade performance and economic growth of the Azerbaijan Republic will be weaker than we expect as part of our base case scenario.

“It also reflects the potential increase in risks to the banking sector of the country or reduction of the government's fiscal flexibility, for example due to the fact that the expenditure containment would be problematic for political reasons,” the report said.

According to experts of the rating agency, in a period of low and more volatile oil prices, the economic outlook for the economy of Azerbaijan is largely dependent on the oil and gas sector and will largely be determined by the reform program of the government, including the business environment measures to improve and diversify the economy through the development of sectors not related to oil and gas sector.

“At the present time, we believe the pace and effectiveness of structural reforms are rather low,” the report said. -----71D