Moody's upgrades Azerbaijan's credit rating to investment grade

The international rating agency Moody's has raised the sovereign credit rating of Azerbaijan to “Baa3” from “Ba1”, thus assigning the country an investment rating, Report informs referring to Moody's.

The rating forecast has been confirmed as “positive”.

"The positive outlook reflects our view that ongoing reforms could further reduce economic and fiscal dependence on the hydrocarbon sector beyond our expectations. Moreover, there are prospects for further enhancements in institutional strength and governance amid ongoing reforms to enhance monetary policy transmission, financial sector regulations, public finance management and transparency in public administrative processes," reads the message.

"The upgrade reflects improvements in institutional effectiveness, shown in a lengthening track record of maintaining macroeconomic and fiscal stability through recent shocks and oil price swings, which we expect to continue. Progress in regulatory reforms will further enhance banking sector stability, while declining fiscal reliance on hydrocarbon revenues strengthens fiscal resilience. Rapid growth in the transport sector as well as ongoing development of the Karabakh and Eastern Zangezur regions support prospects for further economic diversification."

"Ongoing and effective efforts by Azerbaijan to position itself as a transport and green energy hub allows sustained and significant growth in non-oil sectors such as transport and logistics, construction, tourism and ICT. Greater resilience to fluctuations in hydrocarbon prices and production has supported economic and financial stability through recent shocks and we expect such resilience to continue through potential future shocks.

Azerbaijan's advantageous geographical location at the crossroads of key transport corridors and rising activity across the Trans-Caspian International Transport Route – also known as the Middle Corridor – will drive robust performance in the transport and logistics sector and attract sizeable investments with positive spillovers across the rest of the economy," Moody's noted. "A strong government balance sheet with a low debt burden and a net asset position, and very high debt affordability remain key credit strengths. Even as diversification progresses, we expect Azerbaijan to continue to benefit from hydrocarbon-related income in the medium to long-term."