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"Moody`s": The devaluation of the local currency replenished the state budget, but it had negative effect on the Azeri banking sector

05 June 2015 07:28 (UTC +04:00)

According to agency, Azerbaijan's economy is heavily dependent on the hydrocarbon sector, which accounts for 40% of nominal GDP and more than 70% to total consolidated government revenues. Moody's forecasts that GDP growth will slow down to 1% in 2015, based on its current assumption of oil prices at roughly 55 $/bbl this year.

This has a negative spillover effect on the non-oil sector, including the banking

system, through a slowdown of economic activity. However, Moody's acknowledges that government spending initiatives and the sizable pool of accumulated foreign assets (at 70% of GDP) -- which serve as a buffer against external shocks -- partly mitigate the pressure. The devaluation of the local currency by 25% on 21 February 2015 replenished the state budget as it reduced fiscal pressure from lower oil revenues. However, it had negative effect on the Azeri banking sector.