“Azerbaijani banking system's funding profile has strengthened. No material outflows of retail and corporate deposits have been observed since 2016, was stated in the forecasts of the international credit rating agency S&P Global Ratings for the banking sector of Azerbaijan, “APA-Economics” reports.
The agency noted that core customer deposits will fund loans over the next few years, eliminating the need for external funding. Deposit dollarization has progressively declined to regional peer levels but remains significantly higher than loans. Also, volatile nonresident deposits, at 5%, are much lower than at regional peers.
S&P added that economic growth prospects for Azerbaijan in 2023-2024 are lower than for most regional peers. Pressure on growth prospects relates mainly to a long-term gradual decline in oil output: “We forecast no real GDP growth in 2023 and 1.4% growth in 2024. This could curtail growth in the banking sector, although for 2023, we expect above 10% growth in loans and deposits."