Fitch affirms Azerbaijan

Fitch Ratings said it affirmed the Republic of Azerbaijan's BB foreign and local currency issuer default ratings, B short-term issuer default rating and BB country ceiling.

The outlook is stable.

Fitch said the ratings are supported by the rapid growth of the economy and exports, structural reform to encourage private investment and the development of the non-oil sector, ongoing development of the country's sizeable oil and gas resources and moderate government and external debt ratios. At an estimated 15% of GDP, government debt remains far below the BB median and authorities have accumulated assets of almost $1.3 billion, or more than 10% of GDP, in an oil fund, providing a sizeable buffer against shocks.

Factors constraining Azerbaijan's sovereign ratings include the challenge of sustaining macroeconomic stability in the face of huge inflows from the energy sector while at the same time managing increases in public spending necessary to tackle the major infrastructure and development needs of the country. Despite the rapid GDP growth, Azerbaijan remains a poor country with high social needs, the agency said. The business environment is difficult, corporate governance and transparency is poor and the non-oil sector is underdeveloped. Corruption remains a serious problem and Fitch said the banking system is among the weakest that it rates.

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