S&P Global Ratings revised its outlook on the long-term credit rating on Azerbaijan to negative from stable. At the same time, we affirmed our long- and short-term foreign and local currency sovereign credit ratings at 'BB+/B', APA-Economics reports citing Rating Agency.
The negative outlook reflects rising risks to Azerbaijan's fiscal performance, external balance sheet, and macro-financial stability amid the significant recent military escalation of the Nagorno-Karabakh conflict, which may take quite some time to resolve.
The outlook also reflects the possibility that the conflict could weigh on Azerbaijan's growth prospects and dampen foreign investor confidence.
The agency could lower the ratings on Azerbaijan if protracted military confrontation led to a material deterioration of its fiscal position or external balance sheet, for instance as a result of higher fiscal expenses or accelerated dollarization and outflows of dollar deposits from the financial system.
S&P also could revise the outlook to stable if the conflict and lingering uncertainty subsided, averting negative repercussions for Azerbaijan's fiscal, balance-of-payments, and growth metrics.
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