Amid intensified military confrontation, Azerbaijan's fiscal metrics could materially deteriorate as a result of increased budget spending on defense, social support to affected households, and the restoration of badly damaged civil infrastructure, APA-Economics reports citing S&P Rating Agency.
Fiscal pressures are already arising from lower hydrocarbon revenues and the impact of the pandemic on non-oil tax collection.
Apart from the immediate implications, the agency also considers that medium-term economic risks have increased and expects that Azerbaijan's real GDP will shrink by 6.9% in 2020 before rebounding to about 3.0% growth in 2021. Increased military tensions could compound pandemic- and oil-price-related downside risks to growth, weighing on business confidence and household consumption.
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