S&P Global Ratings affirmed its long- and short-term foreign and local currency sovereign credit ratings on Azerbaijan at 'BB+/B', APA-Economics reports.
The outlook on the long-term ratings is stable.
"We could lower the ratings if Azerbaijan's economic prospects weakened compared with our forecast. This could happen, for example, as a result of delays affecting the Shah Deniz II (SDII) gas project or a faster-than-expected fall in oil production. It could also occur if hydrocarbon prices declined beyond our assumptions, which would also have a knock-on effect on nonoil sector performance through lower consumer confidence or reduced investments. We could also lower the ratings if domestic political risks increased in response to a significant recent decline in real incomes, possibly restricting the government's ability to control spending. Conversely, we could consider an upgrade if external surpluses were higher than base-line projections, resulting in a faster accumulation of government fiscal assets. This could happen, for example, if hydrocarbon prices markedly increased in contrast to our assumptions and we expected the increase to not be temporary. Upside to the ratings could also build if the government devised and implemented a program of reforms, addressing a number of Azerbaijan's structural impediments, such as limited economic diversification and substantial constraints to monetary policy effectiveness."
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