By Rasana Gasimova
Azerbaijan’s GDP growth will be 2.2 percent in 2020-2021, International rating agency Fitch Ratings has reported.
The agency reported that this growth will be driven by new gas production coming on-stream, and supported by the government packages announced in the first quarter of 2019.
“Real GDP growth continues to recover from the oil shock and devaluation crises since 2014. Fitch estimates that real GDP growth reached 2.4 percent in 2019 from 1.4 percent in 2018, driven by 3.5 percent non-oil growth and just 0.8 percent for the oil and gas industry. We forecast the growth to stabilise at 2.2 percent in 2020-21,” the report reads.
“Inflation averaged 2.6 percent in 2019, remaining closer to the lower bound of the 4 plus or minus 2 percent target band, helped by the stable exchange rate and lower imported food prices. Fitch forecasts inflation to rise to average 3.3 percent in 2020 due to stronger demand pressures from government measures and policy rate cuts,” the report reads.
Fitch also informed that it does not expect any major changes to macroeconomic policy-making from the upcoming snap parliamentary elections in February.
The agency has also affirmed Azerbaijan's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook.
The agency has affirmed the country’s short-term local and foreign currency IDRs at 'B', the issuer rating for senior unsecured debt in local and foreign currencies at 'BB +', the country ceiling rating and the issuer rating for senior unsecured short-term bonds in local currency at ' BB + ".
It was noted that Azerbaijan's 'BB+' IDRs reflect its strong external balance sheet and low government debt, set against weaknesses from its heavy hydrocarbon dependence, an underdeveloped, albeit improving policy framework, weak governance indicators and continued banking sector vulnerabilities.
Note that the Azerbaijani government forecasts GDP growth at 3 percent in 2020, and 3.7 percent in 2021. The government predicts an average annual inflation of 4.6 percent in 2020.
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