Azerbaijan was cut to junk by Fitch Ratings, which followed downgrades by the other two main credit companies, as the former Soviet Union’s third-biggest oil exporter is expected to see its economy shrink for the first time in seven years amid a collapse in crude.
The rating was lowered to BB+ from BBB-, Fitch said in a statement on Friday. Standard & Poor’s and Moody’s Investors Service had cut the country to junk in the past month.
“Low oil prices have caused a significant deterioration in the fiscal position,” the Fitch analysts said. “A failure to adjust expenditure or revenue to the lower oil price environment” could trigger additional negative rating action, they said.
Azerbaijan’s gross domestic product shrank 3.3 percent in January from a year earlier as both oil production and prices fell, according to the State Statistics Committee. Fitch forecast gross domestic product will decline 3.3 percent in 2016, while S&P expects the economy to contract 1 percent this year, with gross domestic product per capita plummeting by almost half to $4,100 from $8,000 two years ago.
The country’s parliament on Tuesday revised the state budget for 2016, cutting its oil-price projection to $25 a barrel from the previous estimate of $50. Planned budget spending was increased 13.7 percent to 18.5 billion manat ($11.8 billion) and revenue was raised 15.5 percent to 16.8 billion manat.
The national currency lost more than 50 percent against the dollar after two devaluations last year. The central bank announced a shift to a floating exchange rate in December after burning through more than half of its reserves in 2015.