S&P Global Ratings affirmed its 'BB+/B' long- and short-term foreign and local currency sovereign credit ratings on Azerbaijan. The outlook is stable, APA-Economics reports.
The stable outlook reflects our expectation that, despite a projected medium-term decline in oil production, Azerbaijan's significant fiscal and external buffers will help to shield the economy against any renewed terms-of-trade shocks.
We could lower the ratings if Azerbaijan's fiscal balances prove weaker than we expect over the medium term. This could happen, for example, because aging oil fields result in oil production declining faster than we expect. Reduced hydrocarbon earnings could also weigh on Azerbaijan's broader economic performance, compared with that of peers.
We could raise the ratings if regional geopolitical risks subsided while Azerbaijan accumulated significant additional fiscal buffers, compared with our current forecast.
Azerbaijan's strong fiscal and external stock positions support the sovereign ratings. The government has accumulated substantial liquid assets within the sovereign wealth fund SOFAZ. We forecast that the government will have access to liquid assets of nearly 70% of GDP through 2027 and that gross general government debt will stabilize around 20% of GDP. We expect Azerbaijan will continue to run twin fiscal and current account surpluses over the next three years, which is based on our projected oil prices of $85 per barrel (/bbl) on average for the remainder of 2024 and $80/bbl thereafter.
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