Fitch Ratings has revised the Outlook on Azerbaijan's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at 'BB+', ONA reports citing Fitch.
The strength of the sovereign balance sheets has been preserved during the pandemic and is supported by upward revisions of Fitch's oil price forecasts in the past six months, further easing the risk of a disorderly macroeconomic adjustment. The risk of another Covid-19 wave or renewal of military conflict in Nagorno-Karabakh negatively impacting sovereign financial buffers has also receded since our previous review in November.
The rating is supported by Azerbaijan's very strong external balance sheet, low public debt, and strong financing flexibility from large sovereign wealth fund assets, as well as favourable ease of doing business indicators. Set against these factors are weak governance indicators and lack of predictability and transparency of policy-making, especially in relation to the exchange rate regime, which increases the risk of policy missteps and disruptive adjustments to shocks. High banking sector dollarisation and dependence on the hydrocarbon sector (accounting for near 40% of GDP, 86% of exports, and two-thirds of fiscal revenues) also weigh on the rating.