Azerbaijan downgraded from investment grade to BB+
Weaker growth and continuing pressures from the lower oil price were the main reasons for S&P’s decision to cut Azerbaijan’s investment grade rating, last affirmed on July 31, 2015, to BB+ with a stable outlook. S&P expects Azerbaijani economy to contract 1.0% y/y in 2016 and the budget to remain in deficit in 2016 and 2017 after the 2015 budget deficit came in at 5.2% of GDP. Albeit, it expects the current account balance to remain in surplus, as the expected fall in domestic demand will contract imports.
2016 budget revised with oil price taken at US$ 25/bbl
According to Ministry of Finance, Azerbaijan has corrected its 2016 budget in light of falling oil prices and due to the need to account for new social obligations. Oil price is taken at US$ 25/bbl, down from US$ 50/bbl in the original document. At the same time, government is increasing spending from the state budget to meet recent wage and social payments increases. Both spending and revenues have been increased by AZN 2.0bn, resulting in AZN 1.7bn deficit for the state budget, which will be covered by tapping the government deposit in the treasury account (at AZN 1.4bn at end-2015), privatization proceeds, and bond issuance.
Commercial banks’ demand for US$ below the offered amount
In three FX auctions organized by the Central Bank over the last week, the regulator offered US$ 600.0mn, while demand was limited to US$ 219.8mn.
