Bloomberg News

Azeri Rating Outlook Cut to Stable by Fitch on State Spending

May 11, 2012

Azerbaijan’s sovereign-credit grade outlook was cut by Fitch Ratings because the Caspian Sea nation raised spending as oil output declined.

Fitch lowered its outlook to stable from positive, reaffirming its BBB- rating, the lowest investment grade and on a par with Iceland, Latvia and Croatia. Moody’s Investors Service and Standard & Poor’s have both assigned Azerbaijan their minimum investment ratings.

“The general government increased spending by more than expected in 2011 and oil production fell unexpectedly sharply,” Charles Seville, director of Fitch’s sovereign team, said today in an e-mailed statement from London. “At the same time, the agency recognizes that the sovereign balance sheet continues to strengthen, and that the general government is running substantial surpluses.”

Azerbaijan is the former Soviet Union’s third-largest oil producer, with foreign companies such as BP Plc among investors in its energy industry. Output decreased to 45.6 million tons last year from 51 million tons in 2010.

While production stabilized in the first quarter from the previous three months, it won’t recover to its 2010 peak of 1 million barrels a day before 2014, Fitch said. Output is more volatile than in other oil-producing nations with similar credit grades such as Russia and Kazakhstan, both rated BBB, it added.

A political shock, either domestic or external, may put downward pressure on Azerbaijan’s ratings, Fitch said, adding that “extra-parliamentary opposition to the government, although minor, has been on an upswing.”

To contact the reporter on this story: Zulfugar Agayev in Baku at

To contact the editor responsible for this story: Hellmuth Tromm at

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