Fitch forecasts current account to return to surplus in Azerbaijan

 By Trend

Fitch Ratings forecasts the current account in Azerbaijan returns to a surplus of 7.9 percent of GDP in 2021, from last year's deficit of 0.5 percent, Trend reports with reference to the rating agency.

Fitch Ratings has affirmed Azerbaijan's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook.

The rating is supported by Azerbaijan's very strong external balance sheet, low public debt and strong financing flexibility from large sovereign wealth fund assets.

Azerbaijan's large external buffers have been preserved during the pandemic and are supported by the higher oil price. Sovereign foreign-currency assets rose to $51.2 billion at end-3Q21 (86 percent of which comprise holdings of the sovereign wealth fund SOFAZ), from $49.9 billion at end-2020, equivalent to 26 months of current external payments.

Fitch forecasts the current account returns to a surplus of 7.9 percent of GDP in 2021, from last year's deficit of 0.5 percent, before narrowing to average 5.3 percent in 2022-2023, mainly driven by our lower forecast average oil price (of $55 per barrel in 2022 and $53 per barrel in 2023, from $63 per barrel this year) but still the highest in the peer group. The net sovereign asset position is projected to increase to 84.1 percent of GDP at end-2023, from 83.1 percent at end-2020.