Press Release: Statement at the End of an IMF Staff Visit to Azerbaijan

October 28, 2014

Press Release No.14/479
October 28, 2014

A staff team of the International Monetary Fund (IMF) led by Raja Almarzoqi visited Baku during October 21-27, 2014, to assess macroeconomic developments and prepare for the Article IV Consultation mission in June 2015. The team held discussions with senior government officials and representatives of the private sector and the diplomatic community.

At the conclusion of the visit, Mr. Almarzoqi issued the following statement:

“Economic activity has been resilient to regional turmoil in light of limited economic links with Russia. GDP growth is projected at 4 percent in 2014 and 3½ percent in 2015, with a modest decline in oil output and a slowdown in non-oil growth associated with fiscal prudence and necessary macro prudential tightening. Inflation is projected to hover around 3 percent. Risks arising from low oil prices are mitigated in the short term by reserve buffers.

“The mission encourages the authorities to build upon recent progress toward fiscal sustainability by maintaining fiscal consolidation in the 2015 budget. While the budget oil price assumption of $90 per barrel is prudent, expenditure commitments arising from international events limit fiscal space. Further adverse oil price developments would warrant consideration of a reduction in spending. Nevertheless, the budget should be able to accommodate expenditures that will boost the geographical diversification of gas exports. Completion of the public expenditure and financial accountability assessment (PEFA) update will pave the way for improving public spending efficiency.

“The exchange rate remains the anchor of monetary policy, supported by ample reserves. A gradual move towards exchange rate flexibility would foster financial market development. Further moderating growth in consumer lending, finalizing ongoing bank capitalization, and restructuring the International Bank of Azerbaijan will reduce financial sector vulnerabilities.

“Improving the business climate is crucial for diversification and necessary for replacement of public investment by market-based private investment. Priorities are tackling competition and trade barriers, as well as broadening the coverage of anti-corruption programs.

“Concerted efforts to strengthen macroeconomic statistics, supported by IMF technical assistance, would help policy makers and investors to make better-informed decisions.

“The mission thanks the authorities for their hospitality and constructive discussions.”


Azerbaijan: Selected Economic and Financial Indicators, 2010–15
 
   

 

 

 

 

 

  2010 2011 2012 2013 2014 2015
        Prel. Proi, Proi,
 
  (Annual percentage change, unless otherwise specified)

National income

           

GDP at constant prices

5.0 0.1 2.2 5.8 3.9 3.4

Of which: Oil sector 1/

5.0 -9.8 -5.3 0.5 -1.4 -0.9

Non-oil sector 2/

7.6 9.4 9.6 9.9 7.5 6.0

Consumer price index (end of period)

7.9 5.6 -0.3 3.6 2.5 4.0

Consumer price index (period average)

5.7 7.9 1.0 2.4 3.1 3.3

Money and credit

           

Net foreign assets

34.6 68.7 5.6 19.9 19.8 10.7

Net domestic assets

13.5 2.8 40.3 8.7 22.4 24.8

Domestic credit

8.4 7.9 39.6 4.3 22.8 17.2

Of which: Credit to private sector

6.6 18.1 20.8 27.6 9.4 16.3

Manat base money

31.6 29.4 27.1 10.7 24.4 17.6

Manat broad money

34.8 32.5 25.5 19.0 14.5 10.0

Total broad money

21.9 32.1 20.6 15.4 19.7 17.6

Foreign currency deposits ratio to broad money

21.2 20.9 17.7 15.1 18.8 24.1

Velocity of total broad money (M3) 3/

2.8 2.6 2.3 2.4 2.2 2.1

External sector (in US$)

           

Exports f.o.b.

25.5 30.3 -5.4 -2.1 -10.4 -15.6

Of which: Oil sector

25.7 30.9 -6.7 -2.1 -10.9 -17.2

Imports f.o.b.

3.6 50.7 3.1 5.0 -5.9 -7.8

Of which: Oil sector

19.6 35.5 -5.9 7.3 3.1 2.9

Export volumes

-1.4 -3.3 -6.1 -1.2 -9.2 -12.7

Import volumes

-4.0 38.2 4.9 6.4 -4.5 -6.4

Terms of trade

27.1 30.7 2.5 0.5 0.2 -1.8

Real effective exchange rate

1.1 2.6 0.8 3.0
  (In percent of GDP, unless otherwise specified)

Gross investment

18.5 21.2 22.7 23.1 23.1 24.1

Consolidated government

12.5 16.0 16.1 16.6 16.7 18.1

Private sector

6.1 5.1 6.7 6.5 6.5 6.0

Of which: Oil sector

1.9 2.1 3.1 2.9 2.9 2.8

Gross domestic savings

52.5 54.1 50.7 45.9 41.7 36.4

Gross national savings

46.6 47.6 44.5 40.1 36.9 32.8

Consolidated government

27.1 29.7 20.9 17.4 14.3 9.3

Private sector 4/

19.5 18.0 23.6 22.7 22.6 23.5

Consolidated central government finance

           

Overall fiscal balance

14.6 13.6 4.9 0.8 -2.4 -8.9

Non-oil primary balance, in percent of non-oil GDP

-36.3 -40.3 -45.4 -45.1 -43.0 -44.2

External sector

           

Current account (- deficit)

28.0 26.5 21.8 17.0 13.7 8.7

Foreign direct investment (net)

0.6 1.4 1.1 1.5 -0.2 0.9

Public and publicly guaranteed external debt outstanding

7.4 7.3 9.2 11.7 14.4 15.0

Memorandum items:

           

Gross official international reserves (in millions of U.S. dollars)

6,721 10,887 11,587 13,787 15,787 17,787

Nominal GDP (in millions of manat)

42,465 51,158 53,968 57,708 60,487 65,110

Nominal non-oil GDP (in millions of manat) 2/

22,243 25,393 29,766 34,051 37,522 41,347

Nominal non-oil GDP (in millions of USD) 2/

27,877 32,286 37,919 43,405 47,925 52,811

Nominal GDP per capita (in U.S. dollars)

5,847 7,106 7,538 8,160 8,658 9,340

Nominal GDP (in millions of U.S. dollars)

52,913 64,819 68,700 73,537 77,180 83,161

Oil Fund Assets (in millions of U.S. dollars)

22,766 29,800 34,058 35,712 38,309 32,802

Population (mid-year, in millions)

9.0 9.1 9.2 9.3 9.3 9.4

Exchange rate (manat/dollar, end of period)

0.798 0.787 0.785 0.785
 

Sources: Azerbaijani authorities; and IMF staff estimates and projections.

1/ Includes the production and processing of oil and gas.

2/ Includes the transportation of oil and gas (except transportation through the western route), as well as the export tax paid by the state oil company.

3/ Defined as gross domestic demand (excluding oil sector-related imports) divided by average broad money.

 

4/ Historical data includes statistical discrepancy.

           

5/ IMF staff estimates of the macroeconomic framework consistent with the authorities’ approved budget.

 
Azerbaijan: Selected Economic and Financial Indicators, 2010–15
 
   

 

 

 

 

 

  2010 2011 2012 2013 2014 2015
        Prel. Proi, Proi,
 
  (Annual percentage change, unless otherwise specified)

National income

           

GDP at constant prices

5.0 0.1 2.2 5.8 3.9 3.4

Of which: Oil sector 1/

5.0 -9.8 -5.3 0.5 -1.4 -0.9

Non-oil sector 2/

7.6 9.4 9.6 9.9 7.5 6.0

Consumer price index (end of period)

7.9 5.6 -0.3 3.6 2.5 4.0

Consumer price index (period average)

5.7 7.9 1.0 2.4 3.1 3.3

Money and credit

           

Net foreign assets

34.6 68.7 5.6 19.9 19.8 10.7

Net domestic assets

13.5 2.8 40.3 8.7 22.4 24.8

Domestic credit

8.4 7.9 39.6 4.3 22.8 17.2

Of which: Credit to private sector

6.6 18.1 20.8 27.6 9.4 16.3

Manat base money

31.6 29.4 27.1 10.7 24.4 17.6

Manat broad money

34.8 32.5 25.5 19.0 14.5 10.0

Total broad money

21.9 32.1 20.6 15.4 19.7 17.6

Foreign currency deposits ratio to broad money

21.2 20.9 17.7 15.1 18.8 24.1

Velocity of total broad money (M3) 3/

2.8 2.6 2.3 2.4 2.2 2.1

External sector (in US$)

           

Exports f.o.b.

25.5 30.3 -5.4 -2.1 -10.4 -15.6

Of which: Oil sector

25.7 30.9 -6.7 -2.1 -10.9 -17.2

Imports f.o.b.

3.6 50.7 3.1 5.0 -5.9 -7.8

Of which: Oil sector

19.6 35.5 -5.9 7.3 3.1 2.9

Export volumes

-1.4 -3.3 -6.1 -1.2 -9.2 -12.7

Import volumes

-4.0 38.2 4.9 6.4 -4.5 -6.4

Terms of trade

27.1 30.7 2.5 0.5 0.2 -1.8

Real effective exchange rate

1.1 2.6 0.8 3.0
  (In percent of GDP, unless otherwise specified)

Gross investment

18.5 21.2 22.7 23.1 23.1 24.1

Consolidated government

12.5 16.0 16.1 16.6 16.7 18.1

Private sector

6.1 5.1 6.7 6.5 6.5 6.0

Of which: Oil sector

1.9 2.1 3.1 2.9 2.9 2.8

Gross domestic savings

52.5 54.1 50.7 45.9 41.7 36.4

Gross national savings

46.6 47.6 44.5 40.1 36.9 32.8

Consolidated government

27.1 29.7 20.9 17.4 14.3 9.3

Private sector 4/

19.5 18.0 23.6 22.7 22.6 23.5

Consolidated central government finance

           

Overall fiscal balance

14.6 13.6 4.9 0.8 -2.4 -8.9

Non-oil primary balance, in percent of non-oil GDP

-36.3 -40.3 -45.4 -45.1 -43.0 -44.2

External sector

           

Current account (- deficit)

28.0 26.5 21.8 17.0 13.7 8.7

Foreign direct investment (net)

0.6 1.4 1.1 1.5 -0.2 0.9

Public and publicly guaranteed external debt outstanding

7.4 7.3 9.2 11.7 14.4 15.0

Memorandum items:

           

Gross official international reserves (in millions of U.S. dollars)

6,721 10,887 11,587 13,787 15,787 17,787

Nominal GDP (in millions of manat)

42,465 51,158 53,968 57,708 60,487 65,110

Nominal non-oil GDP (in millions of manat) 2/

22,243 25,393 29,766 34,051 37,522 41,347

Nominal non-oil GDP (in millions of USD) 2/

27,877 32,286 37,919 43,405 47,925 52,811

Nominal GDP per capita (in U.S. dollars)

5,847 7,106 7,538 8,160 8,658 9,340

Nominal GDP (in millions of U.S. dollars)

52,913 64,819 68,700 73,537 77,180 83,161

Oil Fund Assets (in millions of U.S. dollars)

22,766 29,800 34,058 35,712 38,309 32,802

Population (mid-year, in millions)

9.0 9.1 9.2 9.3 9.3 9.4

Exchange rate (manat/dollar, end of period)

0.798 0.787 0.785 0.785
 

Sources: Azerbaijani authorities; and IMF staff estimates and projections.

1/ Includes the production and processing of oil and gas.

2/ Includes the transportation of oil and gas (except transportation through the western route), as well as the export tax paid by the state oil company.

3/ Defined as gross domestic demand (excluding oil sector-related imports) divided by average broad money.

 

4/ Historical data includes statistical discrepancy.

           

5/ IMF staff estimates of the macroeconomic framework consistent with the authorities’ approved budget.

 



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