Azernews.Az

Standard & Poor's Ratings Services upgraded Azerbaijan's sovereign credit ratings to investment grade on expectations the nation's public-sector-asset and international-investment positions have grown enough to provide a buffer against any potential oil price declines that exceed expectations, The Wall Street Journal reported.

S&P raised Azerbaijan's ratings one notche to triple-B minus, with a stable outlook.

Azerbaijan's lawmakers recently approved a 2012 budget that forecasts steady economic growth for the energy-rich ex-Soviet state and boosts defence spending amid its military stand-off with Armenia.

The credit-ratings firm said a further upgrade is possible if the business environment improves substantially, structural reform and economic diversification efforts accelerate, or monetary policy and the banking system strengthen.

The ratings could come under pressure if there is a substantial shortfall in its external and budget cushion or a significant escalation of political tensions or disruption in domestic political stability.

S&P said it expects that medium-term prospects for oil production have improved, after a decline in production this year. Exports are expected to grow modestly and then stabilize in 2014 for several years.

As a result, surpluses in Azerbaijan's current account and consolidated budgets should continue, according to S&P.

Assets of its state oil fund, a fiscal reserve invested externally, will rise to 56% of gross domestic product this year from 42% at the end of 2010, S&P said.