"Moody's Investors Service" ("Moody's") expect current account balances to deteriorate for most CIS countries, incorporating the weaker outlook for exports and remittances, as well as higher prices for energy imports, APA-Economics reports citing Moody's.
"This will exacerbate wide current account deficits in Moldova, Georgia (Ba2 stable) and Kyrgyz Republic. Conversely, windfall gains from hydrocarbon exports represent a positive terms of trade shock that will largely insulate Azerbaijan (Ba2 positive) and Kazakhstan (Baa2 stable) from such external pressures.
We expect the weaker growth outlook to pressure revenue, with the exception of net oil exporters Azerbaijan and Kazakhstan which will benefit from even higher commodity prices. Armenia, Georgia, Kyrgyz Republic and Tajikistan are worst placed, having entered into 2022 with already high debt burdens and wide fiscal deficits relative to other CIS countries, while Armenia's debt affordability is particularly poor. Public demand for higher expenditure to support households and businesses may also increase.
Conversely, Azerbaijan and Kazakhstan are net hydrocarbon exporters and could potentially step in to fill any shortfalls, although their ability to do so may be constrained by underdeveloped infrastructure, especially among the landlocked CIS states, or by geopolitical considerations, such as tensions surrounding the Nagorno-Karabakh region.
Under our new baseline assumptions for oil prices to average above $110 per barrel over 2022, we expect a widening in current account deficits of around four to six percentage points of GDP for Armenia, Kyrgyz Republic, Moldova and Georgia, with the latter being most impacted by the higher oil prices. Conversely, windfall gains from hydrocarbon exports represent a positive terms of trade shock that will largely insulate Azerbaijan and Kazakhstan from such external pressures," the statement reads.
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