Fitch cuts Azerbaijan credit rating to junk

Fitch Ratings has cut Azerbaijan to junk as a collapse in crude is wreaking havoc in the former Soviet Union’s third-biggest oil exporter. 

Fitch lowered its rating for Azerbaijan to BB+ from BBB- following downgrades by Standard & Poor’s and Moody’s Investors Service which had cut the country to junk in the past month.

Azerbaijan’s economy is expected to shrink for the first time in seven years. S&P expects the economy to contract 1 percent this year.

Fitch sees gross domestic product declining 3.3 percent in 2016. According to S&P, Azerbaijan’s GDP per capita will plummet by almost half to $4,100 from $8,000 two years ago.

“Low oil prices have caused a significant deterioration in the fiscal position,” Bloomberg quoted Fitch as saying.

“A failure to adjust expenditure or revenue to the lower oil price environment” could trigger additional negative rating action, it added.

On Tuesday, Azerbaijan’s parliament revised the state budget for 2016, cutting its oil-price projection to $25 a barrel from the previous estimate of $50.

The national currency lost more than 50 percent against the dollar after two devaluations last year, forcing the central bank to shift to a floating exchange rate in December after burning through more than half of its reserves in 2015.