Moody's: Azerbaijan, Kazakhstan enjoy more opportunities to deal with "oil" crisis

/By AzerNews/

By Gulgiz Dadashova

Azerbaijan, which energy-oriented economy faced challenges following oil price drop and Russia’s economic downturn, has better chances to overcome the challenging macroeconomic conditions, says Moody's Investors Service.

Moody's report, entitled Sovereigns affected by oil price movements and Russian spillovers from May 14 reads that countries in the Commonwealth of Independent States will continue to be affected by oil price movements and Russian spillovers in 2015-16.

"Despite the recent recovery, oil prices remain at suppressed levels and continue to affect oil exporters. Meanwhile, the outlook for net energy importers remains bleak as they rely heavily on Russia for remittances, trade and finance. Other challenges some countries face include exposure to the Ukraine crisis and weak banking systems."

Although the CIS region's three net energy exporters -- Azerbaijan (Baa3 stable), Kazakhstan (Baa2 stable) and Russia (Ba1 negative) -- have low debt-to-GDP ratios and gross borrowing requirements, uncertainty around future oil prices and geopolitical concerns weigh on the credit quality of these countries, in Moody's view.

However, Moody's expects that Azerbaijan and Kazakhstan are best placed among CIS countries to navigate the challenging macroeconomic conditions, as both have large reserve buffers and are not involved in the conflict in Ukraine.

The recession in Russia will outweigh the beneficial effects of lower oil prices for the net energy importers -- Armenia (Ba3 negative), Belarus (Caa1 negative), Georgia, Moldova (B3 stable) and Ukraine (Ca negative).

The oil factor still accounts for a large share in the Azerbaijani economy. The South Caucasus’s biggest economy and most populous nation of over 9 million people relies on oil for bulk of the state revenue and 92 percent of export earnings.

Oil’s recovery from a six-year low is stalling near $60 a barrel amid speculation that the price rebound will sustain a supply glut. Brent for June settlement, which expires Thursday, gained 28 cents, or 0.4 percent, to $67.09 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery traded at $60.57 a barrel at 11:06 a.m. London time, up 7 cents, according to Bloomberg.