Moody's: Azerbaijan's fiscal opportunities limited

Baku. 30 January. REPORT.AZ/ Azerbaijan's fiscal capacities are limited in the background of increasing government debt and interest payments.

Report informs citing the International rating agency Moody's.

Moody's Investors Service (Moody's) says that the outlook for sovereign creditworthiness in the Commonwealth of Independent States (CIS) in 2018 is stable overall, in view of the healthy economic growth and stable oil prices seen after the region-wide economic shock of 2014-2016.

Moody's further notes that Russia's recovery will boost exports and remittances across the region. Moreover, the fact that most trade is intra-regional will help reinforce demand for goods and services exports across the CIS.

Current levels of oil prices relieve pressure on terms of trade in Russia, Kazakhstan and Azerbaijan. However, range-bound oil prices will prevent a return to pre-2014 growth rates beyond the initial recovery. Moody's expects oil prices to remain within a range of $ 40 to $ 60 per barrel over the medium term, which will support modest growth for oil exporters in the coming years.

Moody's also notes that the credit implications of a gradual shift in financing conditions are embedded in its ratings. However, a sudden change would have material credit implications for many CIS sovereigns, given elevated public debt, low reserve coverage of forthcoming maturities, a large share of foreign currency debt and highly dollarised banking systems.

In addition, geopolitical and domestic political risks - representing largely moderate to high-probability and high-impact events in the region - will remain prominent in 2018 and could threaten economic stability and reform momentum.

Moody's estimates that the median level of government debt as a share of GDP in the CIS will rise to around 55%, in 2018 from around 32% in 2013.