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Fitch improves forecast for Azerbaijan’s consolidated budget

23 November 2020 09:57 (UTC +04:00)

Fitch Ratings forecasts a consolidated fiscal deficit of 5.7% of GDP for 2020, while the agency’s previous prediction made up 6.8% of GDP, APA-Economics reports citing Fitch.

The revised 2020 budget increased the government's fiscal deficit forecast to 10.9% of GDP for 2020 assuming average oil prices of USD35/b, due to a 21% fall in oil revenues and a 3% rise in expenditures relative to the original 2020 budget. Fitch’s smaller deficit forecast reflects roughly 3.8pp of GDP in SOFAZ asset management gains and slightly higher average oil prices of USD40/b.

The agency forecasts the consolidated fiscal deficit to fall only slightly to 4.4% of GDP in 2021 and to 1.1% in 2022 as oil prices and economic growth recover only gradually.

“We assume 0.6pp of GDP in increased capital expenditure in 2021 and 2022 for post-conflict rebuilding in the Nagorno-Karabakh and surrounding regions, with greater clarity around the scale of this project expected to materialise with the 2021 budget in the coming weeks. We also expect plans for the renewing of currently suspended fiscal rules to be published along with the budget,” the agency says.