S&P upgrades Azerbaijan's outlook to positive

S&P Global Ratings revised its outlook on Azerbaijan to positive from stable, the agency said in the report.

The agency affirmed its 'BB+/B' long- and short-term foreign and local currency sovereign credit ratings on Azerbaijan. It was noted that S&P subsequently withdrew the ratings at the issuer's request.

According to the agency, the positive outlook reflected S&P’s view that tensions between Azerbaijan and Armenia have eased, with a sustained de-escalation, progress toward a peace agreement, and planned defense-spending cuts in both countries' 2026 budgets.

"These developments lower conflict-related tail risks and, if sustained, could strengthen investor confidence and support medium-term growth through improved regional connectivity," S&P said.

It was noted that Azerbaijan continues to maintain exceptional fiscal and external buffers, anchored by substantial assets managed by the sovereign wealth fund, the State Oil Fund of the Republic of Azerbaijan (SOFAZ), a persistent net general government asset position, and low public debt, which provide significant shock-absorption capacity.

According to S&P, Azerbaijan's credit fundamentals will strengthen over the medium term, supported by meaningful progress in the peace process with Armenia and the continued preservation of exceptional fiscal and external buffers.