S & P: Azerbaijan's economy affected by number of negative factors

Standard & Poor's reviewed Banking Industry Country Risk Assessment BICRA for Azerbaijan

Baku. 22 August. REPORT.AZ/ Standard & Poor's Ratings Services reviewed Banking Industry Country Risk Assessment (BICRA) for Azerbaijan. Report informs referring to S & P agency, now Azerbaijan's economy is affected by a number of negative factors associated with a significant drop in oil prices.Azerbaijan remains largely dependent on commodity sector, accounting for 40% of GDP and 95% of export sales in 2013-2014.

S & P considers banking sector of Azerbaijan (Azerbaijan: BBB- / Negative / A-3) to a group 8 in terms of Banking Industry Country Risk Assessment.

As of July 20, 2015, a group of 8 on the classification BICRA included Russia, Georgia, Kazakhstan, Lebanon, Slovenia, Hungary, Croatia, Paraguay, Sri Lanka, Uzbekistan, Bolivia.

Among the main positive factors S & P notes a significant amount of foreign exchange reserves and low debt burden of the government of Azerbaijan, which partially offsets the risks associated with possible stressful situations.

Among the negative factors mentioned strengthening of the economic risks due to the dependence of the economy on raw material industries (especially oil), the rapid growth of dollarization of deposits from customers as a result of the weakening of the national currency, which reinforces foreign exchange and credit risks of banking sector, the growth of household debt and companies to increase credit risk in the economy, the poor quality of corporate governance and a low level of transparency.

S & P expects that as a result of falling oil prices, a surplus of Azerbaijan's current account will be reduced to an average of 5% of GDP in 2015-2018. compared with double-digit rates for the past eight years.In 2015, the budget deficit will amount to almost 9% of GDP, whereas in previous years there has been a budget surplus.

"The level of credit risk in Azerbaijan is extremely high. The rapid growth of indebtedness of households and companies, which is observed in recent years, increases the risk associated with a reduction in commodity prices, however, we still note debt burden as low by international standards".

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