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Eurasia
March 31, 2017 www.intellinews.com I Page 17
Iran with its S-300 air defence missile system – used Iran’s Hamadan Air Base to launch attacks against targets in Syria. It was the first time a foreign power had used an Iranian base since
Moody’s says Kazakhstan more resilient to lower oil prices than Azerbaijan
bne IntelliNews
Moody’s Investors Service said on March 27 that Kazakhstan is proving more resilient to the de- cline in oil prices than Azerbaijan.
The ratings agency concluded this despite policy- makers in Kazakhstan and Azerbaijan having faced similar challenges from the decline in oil prices since the mid-2014 highs. These include double- digit inflation, a drop in foreign exchange reserves, a sharp fall in growth and a weakening banking sector.
Moody’s attributes Kazakhstan’s relative resilience to the Central Asian country’s stronger institutions, greater economic diversification and lower debt lev- els. While both countries rely on hydrocarbon exports for growth and government revenue, Azerbaijan’s economy is more than 3.5-times smaller and half as wealthy, making it more vulnerable to oil prices.
In addition, Kazakhstan has been able to address more of its own business climate challenges and other structural impediments to growth as shown in its Worldwide Governance Indicators, the agen- cy noted.
“For Azerbaijan, oil and gas accounted for 89% of goods exports and 26% of nominal GDP in 2015, and provided 60-70% of consolidated govern- ment revenues,” Moody’s said. “By comparison, for Kazakhstan, oil and gas exports accounted for
WWII. However, Iranian lawmakers claimed the deployment breached a constitutional law ban- ning foreign military bases and Tehran criticised Moscow for publicising the arrangement.
a lower 76% of goods exports and roughly 18% of nominal GDP, and provided around 42% of con- solidated government revenues.”
Moreover, Azerbaijan faces more risks from geopoli- tics due to the conflict over Nagorno-Karabakh – an ongoing quarrel with Armenia over the disputed territory. Kazakhstan, by contrast, has managed to maintain good relations with both its neighbours and with other entities, including the US, Japan and the EU. The country maintains strong ties with Russia, especially in security and defence matters.
Moody’s also mentioned that both countries are experiencing banking sector troubles with prob- lem loans accounting for 25% of gross loans in Azerbaijan and 37% in Kazakhstan. However, it concluded that both countries have taken steps to shore up their respective banking systems.
“Finally, Azerbaijan’s government carries more debt, but both enjoy ample fiscal space. The coun- try’s debt-to-GDP ratio rose by close to 30 per- centage points between 2014 and 2016 as a result of the direct support it provided to the banking sector,” Moody’s said. “In contrast, Kazakhstan’s debt-to-GDP ratio rose by less than 10 percentage points over the same period. However, sizable re- serve buffers and high debt affordability underpin high levels of fiscal strength in both countries.”