Fitch Ratings affirms Azerbaijan's “BBB-“ rating with stable outlook

Fitch Ratings has reaffirmed Azerbaijan's Long-Term Foreign-Currency Issuer Default Rating (IDR) at “BBB-“ with a Stable Outlook, reflecting the country’s strong external balance sheet, low public debt, and financing flexibility supported by substantial sovereign wealth fund assets.

Azerbaijan’s ratings are underpinned by its robust external position, including sovereign foreign-currency assets, which Fitch estimates at USD 76 billion (102 per cent of GDP) in 2024, Caliber.Az reports.

The assets are primarily held by the Sovereign Wealth Fund of Azerbaijan (SOFAZ), with the remainder in the Central Bank of the Republic of Azerbaijan’s (CBRA) reserves.

Azerbaijan’s net sovereign foreign asset position, estimated at 71 per cent of GDP, is the highest among countries with “BBB” and “A” ratings. Fitch expects Azerbaijan's fiscal policy to maintain these strong reserves and avoid macroeconomic imbalances, particularly in light of oil price volatility.

Azerbaijan’s current account surplus, while halved to 6.5 per cnt of GDP in 2024, remains one of the highest in the “BB” category. Despite expected lower oil prices, Azerbaijan is projected to continue accumulating foreign exchange reserves, with a current account surplus averaging 6.2 per cent of GDP in 2025-2026. The country's external creditor position is also among the strongest globally, projected to reach 153 per cent of GDP in 2024.

Fitch estimates Azerbaijan’s economic growth accelerated to 4.1 per cent in 2024, supported by slower declines in oil output and the reconstruction of Karabakh. Growth is expected to slow in the coming years, to 3 per cent in 2025 and 2.4 per cent in 2026, as the impact of public investment continues to moderate and oil production growth eases. 

By Vafa Guliyeva