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Fitch: Russia-Ukraine war strengthened Azerbaijan's external trade balance

27 February 2023 15:51 (UTC +04:00)

International credit rating agency "Fitch Ratings" announced the impact of the Russia-Ukraine war on the credit rating of developing European countries, APA-Economics reports.

There are currently seven sovereigns with a Negative outlook in emerging Europe, the same as at the height of the Covid-19 pandemic. The Negative Outlooks on North Macedonia (BB+) and Romania (BBB-) predate the war. Those on Czech Republic (AA-), Estonia (AA-), Hungary (BBB), and Slovakia (A) reflect risks from the energy crisis and fiscal policy caused by the war. Combined with the downgrades to Ukraine and Belarus in 2022, this highlights the fundamental deterioration in credit conditions the war has caused for the region’s sovereigns.

However, sovereigns in the Caucasus and Central Asia weathered 2022 remarkably well. An unanticipated influx of people and capital from Russia, Ukraine, and Belarus to Georgia (BB) and Armenia (B+) boosted both sovereigns’ macroeconomic, fiscal, and external performance. We revised Georgia’s Outlook to Positive in January 2023 and Armenia’s on 10 February. Confidence in the durability of these flows is important for the trajectory of the ratings.

And while the war’s impact on oil and gas prices has been negative for energy importers, high prices have strengthened the fiscal and external balance sheets of exporters such as Azerbaijan (BB+) and Turkmenistan (B+). We revised Azerbaijan’s Outlook to Positive in October 2022 and Turkmenistan’s earlier this month.