S&P Global Ratings on Jan. 22 revised its outlook on Azerbaijan to stable from negative amid expectations that a ceasefire agreement with Armenia will broadly hold, lowering war-related risks to the country's financial sector.

In the rating agency's assessment, the Russia-brokered truce between Azerbaijan and Armenia over the disputed Nagorno Karabakh region has reduced risks of residents' accelerated flight to foreign currency and the government's disorderly exit from a managed exchange rate regime.

The revised outlook also reflects the rating agency's view that a rebound in economic activity will help prevent a material deterioration in the country's fiscal and external positions over the next 12 months.

S&P Global Ratings expects Azerbaijan's economy to grow 2.1% in 2021, thanks to a pickup in domestic consumption on the back of fiscal stimulus, as well as higher public investment and hydrocarbon exports.

In revising the outlook, S&P Global Ratings affirmed Azerbaijan's BB+/B long- and short-term sovereign credit ratings.

The rating agency said it could lower the ratings if another armed conflict results in a deterioration in the country's security, balance of payments, or domestic financial stability. It could upgrade the ratings if external surpluses beat expectations, among other factors.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.