Fitch Ratings Inc. has degraded Azerbaijan's ratings to junk on Friday followed by a collapse in crude oil price. The third biggest oil exporter of the former Soviet Union is about to its shrinking economy for the first time in seven years due to global oil price falling. The rating has been lowered to BB+ from BBB-.

Fitch Ratings Inc. is one of the three nationally recognized statistical rating organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975. The other two are Moody's Investors Service and Standard & Poor's (S&P). Both of them have cut the country to junk during the previous month.

Low oil prices have caused a significant deterioration in the fiscal position. Failure to adjust expenditure or revenue earning in a lower oil price market may trigger additional negative rating action, reports Daily Newsquoting an unnamed Fitch analyst.

The rating agency has degraded Azerbaijan's long-term foreign and local currency Issuer Default Ratings (IDR) to BB+ from BBB- with a negative outlook forecast. The issue rating on Azerbaijan's senior unsecured foreign currency bond has also been degraded to BB+ from BBB-. The Country Ceiling has been revised to 'BB+' from 'BBB-' and the Short-term foreign-currency IDR has been degraded to B from F3, reportsReuters citing Flitch press release as the source.

Due to fall in oil production and prices, country's gross domestic product (GDP) has shrunk 3.3% during January compared to a year earlier, reveals the State Statistics Committee. Fitch has also forecast for a GDP decline of 3.3% during 2016. Meanwhile, S&P expects the economy to contract 1% this year with gross domestic product per capita plummeting by almost half to $4,100 from $8,000 two years ago, according to a report published in Bloomberg.

Earlier on Tuesday, Azerbaijan's parliament has revised the state budget for 2016, cutting its oil-price projection to $25 a barrel from the previous estimate of $50. Planned budget spending has been increased 13.7% to AZN 18.5 billion ($11.8 billion). Meanwhile, revenue has been raised 15.5% to AZN 16.8 billion.

The national currency has lost more than 50% against the dollar after two devaluations in last year. The central bank has announced opting for a floating exchange rate in December after burning through more than half of its reserves in 2015. But all these efforts have failed to resist outlook degradation from the analysts.

Azerbaijan's parliament has revised its national budget for 2016 cutting its oil-price projection to $25 a barrel from the previous estimate of $50. Country's central bank has gone for a floating exchange rate in December to cope up with the exchange rate battle. But the adopted measures have failed to adjust degradation in economic outlook by the analysts like Fitch Ratings, S&P and Moody's.