Azerbaijan’s robust external balance sheet combined with low debt levels (21.8% at end-2023), and a commitment to a more prudent fiscal stance to manage the windfall from high oil prices, led to its Positive Outlook in 2022, the international ratings agency Fitch Ratings noted, APA-economics reports.
The agency considers that vulnerabilities, such as still weak monetary policy, heavy dependence on hydrocarbons, and low potential growth, remain. Monetary policy continues to be constrained due to excess liquidity, an underdeveloped local market, and high financial dollarisation.
Fitch noted that some progress has been made through the introduction of new central bank instruments to improve policy rate transmission and efforts to reduce financial dollarisation, but fiscal policy remains the main lever to manage risks from oil revenue volatility.
"Thus, greater confidence that the strong public balance sheet will be preserved, and that improvements in the effectiveness of its policy framework will help manage external shocks and reduce macro volatility, could trigger a positive rating action", Fitch added.
Note that, on February 17 this year Fitch Ratings confirmed Azerbaijan's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a Positive Outlook.
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