Fitch affirms Azerbaijan at BBB-; outlook stable

Fitch Ratings has affirmed Azerbaijan's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB-'. The outlooks are stable. 

The issue ratings on Azerbaijan's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB-'. 

The Country Ceiling has been affirmed at 'BBB-' and the Short-term foreign currency IDR at 'F3'.

The affirmation reflects Fitch's expectation that  oil production will remain broadly stable for the next five years. Oil production grew 0.3% in 2013, halting a steep decline from the 2010 peak. New wells and a possible extension of the production sharing agreement between the BP-led consortium and the government will mitigate natural output decline rates.

The natural gas export outlook is also more certain, after stakeholders in the Shah Deniz 2 natural gas project chose an export route to Europe in December.

The government plans to progressively reduce transfers to the budget from SOFAZ, the State Oil Fund, and generate more non-oil revenue. Oil revenues will still account for around two-thirds of the budget, underscoring high dependence on

commodity prices. The 2014 budget calls for spending growth to halve on the previous year to just 5% in nominal terms, so that spending as a share of GDP, which reached 39% of GDP in 2013, will stop growing.

ANN.Az