Moody's confirms Azerbaijan's investment rating

International rating agency Moody's has confirmed Azerbaijan's sovereign credit rating at "Baa3".

As Report informs with reference to Moody's, the rating outlook has been confirmed as "positive".

The agency notes that Azerbaijan's credit rating is supported by significant financial buffers, which reduces vulnerability risks to external shocks.

At the same time, the agency notes that Azerbaijan's economy remains dependent on the oil and gas sector.

"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," Moody's added.

"Upward pressure on the rating could develop if ongoing and further reforms lead to more rapid improvements in governance, transparency, and policy predictability that further strengthen the credibility and effectiveness of institutions and their ability to adjust to long-term challenges. Increasing evidence that diversification efforts will reduce the exposure of the economy and government finances to oil price cycles and long-term carbon transition would additionally put upward pressure on the rating. Material improvements in economic and diplomatic ties with Armenia that reduces risk of a reescalation in geopolitical tensions will also be credit positive," Moody's noted.

"The positive outlook signals that a rating downgrade is unlikely over the near term. The outlook would likely be changed to stable if there were signs of erosion in the credibility and effectiveness of the enhanced macroeconomic and fiscal policy framework that undermines the ability of institutions to respond to long-term challenges. Heightened geopolitical tensions with Armenia or significant spillovers from regional conflicts that would exert a significant negative impact on economic activity and government finances would also be credit negative," reads the update.