An International Monetary Fund (IMF) team led by Ms. Natalia Tamirisa
visited Azerbaijan during June 12–27, 2019, to conduct discussions for the
2019 Article IV Consultation. Upon conclusion of the visit, Ms. Tamirisa
issued the following statement:
“A gradual economic recovery is underway. Recent increases in wages,
pensions, and social assistance; and measures to reduce tax and debt
burdens are expected to boost nonoil growth to 2.7 percent over the near
term. Hydrocarbon production will surge this year as the Southern Gas
Corridor pipeline becomes operational, before settling on a lower yet
stable growth path. Inflation is projected at 3.3 percent over the near
term. The fiscal surplus will rise to 5.8 percent of GDP this year, mainly
due to higher hydrocarbon revenues, and remain broadly stable next year.
The current account surplus is projected to exceed 10 percent of GDP in the
near term.
“Continued fiscal consolidation would help save an adequate portion of the
exhaustible oil income for future generations while using “good” times to
build buffers for “rainy” days. In this context, the government’s
introduction of the fiscal rule in 2019 was a major step forward. It now
needs to be complemented by stronger public financial management, better
fiscal transparency, and management of fiscal risks. A gradual pace of
consolidation, together with steps to improve the efficiency of public
spending and rebalance its composition toward growth-friendly investment in
physical and human capital, would help mitigate any adverse impact on the
economy. Close oversight of state-owned enterprises (SOEs) and the
financial sector would help manage large contingent fiscal liabilities.
“Continued monetary easing appears appropriate, given still tight financial
conditions and remaining spare capacity. Transitioning to inflation
targeting, as the Central Bank of Azerbaijan recently announced, would help
to absorb shocks and encourage better risk management. Together with steps
to modernize monetary operations and increase issuance of local currency
securities, it would foster financial market development, facilitate
financial sector liquidity management, provide a benchmark for corporate
bonds and a risk-free investment for the private sector. Tackling high
non-performing loans, upgrading financial sector regulations and
strengthening financial sector supervision are essential to improve
confidence and prevent a build-up of future vulnerabilities.
“Improving medium-term growth and job prospects and diversifying the
economy require deepening and broadening structural reforms aimed at
increasing the role of the private sector and improving governance and
transparency. The authorities’ recent steps to improve the World Bank’s
Doing Business Indicators need to be complemented by efforts to restructure
SOEs, promote competition, and improve procurement and access to finance.
Enhancing the quality of education and healthcare would help to nurture a
more productive workforce. Social measures should be well-targeted.
Continued improvement of economic policy frameworks and institutions would
help to align policies with the authorities’ vision of private sector-led,
diversified and inclusive economic growth.
“The IMF team would like to express its appreciation to the authorities and
other stakeholders for their hospitality and candid and insightful
discussions.”
|
Azerbaijan: Selected Economic Indicators
|
|
|
|
|
|
Projections
|
|
|
|
2017
|
2018
|
2019
|
2020
|
|
Output
|
|
|
|
|
|
|
Real GDP growth (in percent)
|
|
-0.3
|
1.4
|
2.7
|
2.1
|
|
Real non-oil GDP growth (in percent)
|
|
2.4
|
1.8
|
2.8
|
2.7
|
|
Real oil GDP growth (in percent)
|
|
-4.4
|
0.6
|
2.5
|
1.2
|
|
Employment
|
|
|
|
|
|
|
Unemployment rate (in percent)
|
|
5.1
|
...
|
...
|
...
|
|
Prices
|
|
|
|
|
|
|
Consumer price index (period average)
|
|
12.8
|
2.3
|
3.2
|
3.3
|
|
General government finances
|
|
|
|
|
|
|
Revenue (including grants, in percent of GDP)
|
|
34.2
|
38.8
|
39.9
|
39.0
|
|
Expenditure (in percent of GDP)
|
|
35.6
|
33.1
|
34.1
|
34.0
|
|
Current expenditure
|
|
25.3
|
19.1
|
22.5
|
25.2
|
|
Capital spending and net lending
|
|
10.3
|
14.1
|
11.6
|
8.8
|
|
Fiscal balance (in percent of GDP)
|
|
-1.4
|
5.6
|
5.8
|
5.1
|
|
Non-oil primary fiscal balance (in percent of non-oil GDP)
|
|
-30.9
|
-32.1
|
-31.0
|
-30.2
|
|
General government gross debt (direct borrowing)
|
|
22.5
|
18.8
|
19.2
|
17.9
|
|
General government gross debt including guarantees
|
|
53.2
|
48.4
|
50.3
|
46.2
|
|
Money and credit
|
|
|
|
|
|
|
Broad money (including foreign currency deposits,
percentage change)
|
|
9.0
|
11.3
|
7.2
|
6.0
|
|
Bank credit to the private sector (percentage change)
|
|
-28.1
|
14.9
|
6.8
|
8.2
|
|
Balance of payments
|
|
|
|
|
|
|
Current account balance (in percent of GDP)
|
|
4.1
|
12.9
|
10.4
|
10.9
|
|
Foreign direct investment (in percent of GDP)
|
|
0.7
|
-1.7
|
4.8
|
4.5
|
|
Gross international reserves (in months of non-oil imports)
|
|
5.1
|
4.7
|
5.7
|
6.0
|
|
Exchange rate
|
|
|
|
|
|
|
REER (average, percentage change)
|
|
3.3
|
5.6
|
…
|
…
|
|
Sources: Azerbaijani authorities; and IMF staff estimates
and projections.
|
