Allianz Trade upgrades Azerbaijan rating

International credit insurer Allianz Trade has upgraded Azerbaijan’s country risk rating from C1 to B1, even as escalating tensions in the Middle East and disruptions in the Strait of Hormuz prompted a broader reassessment of global non-payment risks.

The company said the regional conflict and shipping disruptions have led to more downgrades than upgrades worldwide. Five economies — Kuwait, Qatar, Serbia, the United Kingdom and the United Arab Emirates — saw their risk outlooks lowered, while only three countries were upgraded: Azerbaijan, Costa Rica and Kazakhstan, Caliber.Az reports per the report.

Allianz analysts said the downgrades reflect both first-order effects, such as rising commodity prices and supply chain disruptions that threaten corporate profitability, and domestic vulnerabilities, including fiscal pressures in the UK. Countries with so-called “triple deficits” — spanning energy, current account and fiscal balances — are considered particularly exposed to second-order impacts. These include Ukraine, Jordan, Pakistan, Kenya and Ethiopia, followed by Ghana, Egypt, Sri Lanka, Türkiye and Morocco.

In Asia, the insurer said it is closely monitoring Indonesia, Thailand, the Philippines and Taiwan, citing mounting third-order effects. These include slower foreign exchange reserve accumulation, tightening external financing conditions, widening sovereign risk premiums and rising debt servicing costs. Vulnerabilities are especially pronounced in countries near the conflict zone or those with limited external buffers and political constraints. Türkiye, for example, has seen its gross reserves decline sharply.

Despite the broader deterioration in the risk landscape, Allianz said Kazakhstan and Azerbaijan are benefiting from sustained hydrocarbon demand and improved geopolitical positioning. In Azerbaijan’s case, analysts also pointed to reduced political risk following regional normalisation.

Under most rating systems, an “A” grade denotes the strongest creditworthiness, while “B” indicates moderate risk and “C” signals heightened vulnerability. The upgrade to B1 places Azerbaijan in a more stable risk category at a time when many economies are facing mounting external pressures.

By Sabina Mammadli