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Moody's expects further strengthening of Azerbaijan's economy next year

08 August 2018 [14:44] - TODAY.AZ

By Azernews

By Rashid Shirinov

The international rating agency Moody’s expects the acceleration of economic growth in Azerbaijan in 2019, the new report of the agency reads.

“The favorable external environment – the average oil prices amounting to $54 in 2017 compared to $44 in 2016, the stability of the national currency and the decline in inflation led to a gradual recovery of the economy of Azerbaijan,” the Agency’s analysts note.

They predict Azerbaijan’s GDP growth rate to be 1.5 percent in 2018 and 3 percent in 2019, and connect this with the further increase in oil prices and the growth of exports of Azerbaijani products.

Earlier, Fitch Ratings and Standard & Poor’s approved the credit ratings of Azerbaijan. The reports of both agencies noted positive changes in the country’s economy.

In particular, S&P predicts that Azerbaijan’s GDP will grow by an average of 3 percent until 2022, and nominal GDP will grow from 79 to 93 billion manats (from $46.4 billion to $54.63 billion) in the same period. At the same time, unemployment will remain at about 5 percent. Fitch Agency notes that the country will maintain broad political and social stability.

The data by Azerbaijan State Statistics Committee says that the country’s GDP amounted to almost 37.01 billion manats ($21.74 billion) in January-June 2018, which is 1.3 percent more than in the same period of 2017.

At the end of the reporting period, the GDP produced in the non-oil sector of Azerbaijan increased by 2 percent compared to the first half of 2017, and the oil and gas sector saw an increase of 0.1 percent.

Meanwhile, Moody’s also expects the loan portfolio of Azerbaijani banks to grow by 5 to 10 percent in 2018. 

Moody’s analysts note that the resumption of economic growth is likely to cause a gradual increase in demand for loans, mainly due to the growth of loans to the population. Nevertheless, the dynamics of corporate lending in 2018 will remain weak, according to them.

The report says that the share of loans in the total assets of banks fell from 74 percent in 2014 to 41 percent in 2017.

Moody’s expects further clearing of loan portfolios of Azerbaijani banks from bad loans and hedging of the short currency position of the International Bank of Azerbaijan. At the same time, the consolidation of the banking sector will continue, as banks with capital shortages are seeking to join the more financially strong banks, the agency notes.

Capital adequacy indicators will remain broadly stable amid renewed, albeit modest, growth in lending, as well as provision of financial support by shareholders to private banks, the report says.

The data of the Central Bank of Azerbaijan says that as of July 1, 2018, the country’s credit institutions increased lending by 2.95 percent compared to the beginning of the year, to 12.1056 billion manats ($7.11048 billion). Since the beginning of the year, the volume of overdue loans has increased by 7.3 percent to 1.7457 billion manats ($1.02537 billion). At the same time, the share of overdue loans increased from 13.8 to 14.4 percent over the same period.


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