Moody's: Positive outlook reflects improving economic diversification prospects in Azerbaijan

Moody's Ratings (Moody's) has today affirmed the Government of Azerbaijan's issuer and foreign currency senior unsecured ratings at Ba1 and changed the outlook to positive from stable, Report informs.

“The positive outlook reflects improving economic diversification prospects and macroeconomic policy effectiveness that may lead to a further strengthening in Azerbaijan's credit profile consistent with a higher rating level. The rising prominence of the so-called Middle Corridor as an important transport node between Europe and Asia and investment across the country are driving economic prospects, although the impact on economic strength will only become tangible over time. Meanwhile, greater European demand for Azerbaijani gas as well as a widening pipeline of renewable projects will mitigate the impact of depleting oil resources on the country's external accounts,” Moody’s said in a statement.

According to the company, a lengthening track record of maintaining macroeconomic stability through recent shocks including oil price swings and fiscal discipline points to increased policy effectiveness: ‘Continued efforts to enhance governance, if effective, will strengthen institutional effectiveness and policy credibility further over time.”

The rating affirmation reflects credit strengths from the country's strong government balance sheet with a low debt burden, very high debt affordability and sizeable fiscal reserves held in foreign assets, which lowers government liquidity and external vulnerability risks.

“Azerbaijan's local and foreign currency ceilings remain unchanged at Baa2 and Ba1 respectively. The two-notch gap between the local currency ceiling and the sovereign rating balances the large footprint of the government in the economy and still weak institutional governance, against ample sovereign wealth assets that support the country's external and macroeconomic stability,” Moody’s said.