Standard & Poor’s
downgraded Azerbaijan’s credit rating to speculative or “junk.” The credit rating agency forecasted that the Azerbaijani economy would contract in 2016 by 1% “as exports decline while consumption falls in the wake of sizeable manat devaluation.”
“Growth will also be held back by a fall in government spending in real terms and reduced export volumes, which reflect the depletion of oil fields as they age. We understand that, absent sustained investment, oil production will likely fall by 1%-2% a year,” S&P stated on Friday.
“In particular, we expect (gross domestic product) per capita to fall from nearly $8,000 in 2014 to about $4,100 in 2016 while inflation will spike at 15 per cent this year compared to an average of 2 per cent over 2012-2015,” said the ratings agency.
The agency emphasized the negative impact of political risks associated with lack of transparency on Azerbaijan’s economy.
“External risks are increasing, with the central bank’s foreign currency reserves declining by two-thirds from their mid-2014 peak,” S&P stated.
“Azerbaijan continues to face a number of domestic political and geopolitical risks. We believe decision-making is highly centralized and lacks transparency, which can reduce policymaking predictability.”
The statement further read that the agency could lower Azerbaijan’s ratings if economic prospects weaken, “for instance as a result of delayed implementation of the Shah Deniz II gas project leading to reduced investments and ultimately lower exports.”
Earlier this week, Azerbaijan hosted officials from the International Monetary Fund and the World Bank to reportedly discuss a possible $4 billion package aid,
Financial Times
reported.
Turan reported on January 30 that the IMF delegates held talks with the Economy Ministry officials and the State Oil Fund, known as SOFAZ. The Azerbaijani Economy Ministry, however, maintained that the parties did not hold talks on attracting an urgent international assistance package, according to the official statement quoted by
Turan.
In December, the Central Bank of Azerbaijan abandoned its currency peg and floated the manat. Since then, the manat has lost one-third of its value. A series of protests over rising food prices and unemployment took place in Azerbaijan’s regions earlier this month. On January 19, the government imposed a 20 percent charge on foreign exchange taken out of the country for investment abroad.
