Problem loans to decrease, economic growth rate to go up in Azerbaijan

By Trend

According to the Moody’s forecasts, the share of problem loans in the Azerbaijani banking sector will decrease below 10 percent by the end of 2020, Trend reports referring to Moody’s.

Moody’s raised the forecast regarding the banking system from "stable" to "positive" on the basis of the improvement of the situation in the Azerbaijani banking sector.

The continuing economic growth and the unprecedented support of households by the state are the main factors that influenced the assigning of a" positive "forecast to the Azerbaijani banking sector.

Moody’s expects further improvement in the quality of banking assets thanks to cleaning up of the bank balance sheets and the state support for households.

According to the Moody’s baseline scenario, capital adequacy ratios of the banking system as a whole will be stable thanks to an increase in bank profit and the growth of risk-weighted assets.

An important factor is still the government’s readiness to support the entire banking sector, rather than certain banks by improving the monetary and fiscal policies.

The number of banks decreased as a result of financial difficulties and reflects the limited opportunities for the development of the business banking.

"The competitive atmosphere is observed among big private banks," Moody’s said.

According to Moody’s forecasts, the profitability of banks will increase as credit costs decline. Liquidity in manats is being improved thanks to de-dollarization of liabilities throughout the banking system and the state support. But the high level of dollarization of deposits will continue although there is a downward trend.

In general, Moody’s analysts expect the acceleration of economic growth in Azerbaijan up to 3 percent in 2019–2020 in case of favorable world prices for energy resources, export growth and an increase in the share of the non-oil sector in the structure of the economy. However, the economy remains vulnerable to the changes in oil prices.