S&P has improved the economic growth forecast in Azerbaijan

"S&P Global" International Rating Agency predicts that Azerbaijan's GDP growth will be at the level of 4% in 2022.

Qazet.az reports that this is stated in the rating agency's report entitled "Monitoring of financial institutions in the EMEA region for the 4th quarter of 2022: New shocks bring new challenges."

In its July forecast, S&P forecast economic growth in Azerbaijan at 3.5% in 2022, which mainly reflects an increase in gas production, a recovery in the non-oil sector and a slight decrease in oil production: "between 2023 and 2025, the average we expect growth to be slightly more than 1%, as new gas export opportunities partially offset the gradual decline in the oil sector."

However, in the updated forecast, the GDP growth rate is set at 1.5% in 2023 and 2024, and 1% in 2025.

According to the report, oil-producing developing markets of Azerbaijan, Kazakhstan and the GCC member countries can benefit from the current dynamics of energy prices.

“Tightening financing conditions, weaker growth in China, a worsening economic outlook in Europe and a deeper-than-expected recession in the US point to tough times ahead for emerging markets in the EMEA region.

Rising inflation and the rising cost of international borrowing will increase the vulnerability of markets that depend on foreign financing, such as Turkey," the report said.

At the same time, S&P believes that major commodity exporters, particularly countries with significant revenues from the oil and gas sector, could benefit from current price trends.

"Similarly, after the start of the Russia-Ukraine conflict, we observed that some neighboring countries benefited from the flow of people and capital and the redirection of trade flows in the region. This happened due to concerns about the conflict and the sanctions imposed on Russia, as well as the fact that many businesses decided to leave Russia from the beginning of the conflict," the agency's analysts believe.

S&P predicts that the macroeconomic situation in Europe will become more difficult in the next 1-2 years.

"Given the ongoing energy price crisis, we expect downside risks to increase. Russia is compensating for the lack of progress in the military conflict with Ukraine by strengthening its position as a major energy supplier, which is fueling inflation in Europe. Governments are raising support requests for consumers and businesses given rising inflationary pressures. The tightening of financing conditions could exacerbate the problem by undermining more vulnerable economies and weaker players. A prolonged period of rising inflation and low economic growth will increase risks for financial institutions," the report said.