{
  "title": "IMF Staff Completes 2019 Article IV Mission to Azerbaijan",
  "publication": "IMF News, June 27, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/06/27/pr19249-azerbaijan-imf-staff-completes-2019-article-iv-mission",
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  "summary": "An IMF team led by Ms. Natalia Tamirisa visited Azerbaijan during June 12–27, 2019, to conduct discussions for the 2019 Article IV Consultation.",
  "publishDate": "2019-06-27",
  "sections": [
    {
      "heading": "Mission summary and main messages",
      "content": "- An IMF team led by Ms. Natalia Tamirisa visited Azerbaijan during June 12–27, 2019, to conduct discussions for the 2019 Article IV Consultation.\n- End-of-Mission press releases convey preliminary findings after a visit; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.\n- Key high-level recommendations:\n  - Gradual and growth-friendly fiscal consolidation to share exhaustible oil wealth with future generations and strengthen buffers to deal with future shocks.\n  - Move towards inflation targeting and continue strengthening financial sector oversight to improve risk management and foster financial market development.\n  - Continue reforms to ease the business environment and improve policy frameworks, governance, and transparency to support diversified, private-sector led, and inclusive growth."
    },
    {
      "heading": "Macroeconomic outlook and projections",
      "content": "- A gradual economic recovery is underway.\n- 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.\n- Hydrocarbon production will surge this year as the Southern Gas Corridor pipeline becomes operational, before settling on a lower yet stable growth path.\n- Inflation is projected at 3.3 percent over the near term.\n- 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.\n- The current account surplus is projected to exceed 10 percent of GDP in the near term."
    },
    {
      "heading": "Fiscal policy and public finances",
      "content": "- Continued fiscal consolidation is recommended to save an adequate portion of exhaustible oil income for future generations and build buffers.\n- The government’s introduction of the fiscal rule in 2019 is recognized as a major step forward and should be complemented by:\n  - Stronger public financial management.\n  - Better fiscal transparency.\n  - Management of fiscal risks.\n- A gradual pace of consolidation, coupled with improving the efficiency of public spending and rebalancing composition toward growth-friendly investment in physical and human capital, is advised to mitigate adverse impacts.\n- Close oversight of state-owned enterprises (SOEs) and the financial sector is needed to manage large contingent fiscal liabilities."
    },
    {
      "heading": "Monetary policy and financial sector recommendations",
      "content": "- Continued monetary easing appears appropriate given still tight financial conditions and remaining spare capacity.\n- Transitioning to inflation targeting, as the Central Bank of Azerbaijan recently announced, would help absorb shocks and encourage better risk management.\n- Complementary measures include modernizing monetary operations and increasing issuance of local currency securities to:\n  - Foster financial market development.\n  - Facilitate financial sector liquidity management.\n  - Provide a benchmark for corporate bonds and a risk-free investment for the private sector.\n- Urgent financial sector priorities:\n  - Tackle high non-performing loans.\n  - Upgrade financial sector regulations.\n  - Strengthen financial sector supervision to improve confidence and prevent a build-up of future vulnerabilities."
    },
    {
      "heading": "Structural reforms and inclusivity",
      "content": "- Improving medium-term growth, job prospects, and diversifying the economy require deepening and broadening structural reforms to increase the role of the private sector and improve governance and transparency.\n- Recommended actions:\n  - Complement recent steps to improve the World Bank’s Doing Business Indicators with restructuring of SOEs, promotion of competition, and improvements in procurement and access to finance.\n  - Enhance quality of education and healthcare to nurture a more productive workforce.\n  - Ensure social measures are well-targeted.\n  - Continue improving economic policy frameworks and institutions to align policies with the authorities’ vision of private sector-led, diversified and inclusive economic growth."
    },
    {
      "heading": "Selected Economic Indicators (Projections)",
      "content": "- Output\n  - Real GDP growth (in percent): 2017: -0.3; 2018: 1.4; 2019: 2.7; 2020: 2.1\n  - Real non-oil GDP growth (in percent): 2017: 2.4; 2018: 1.8; 2019: 2.8\n  - Real oil GDP growth (in percent): 2017: -4.4; 2018: 0.6; 2019: 2.5; 2020: 1.2\n- Employment\n  - Unemployment rate (in percent): 2017: 5.1; 2018: ...\n- Prices\n  - Consumer price index (period average): 2017: 12.8; 2018: 2.3; 2019: 3.2; 2020: 3.3\n- General government finances\n  - Revenue (including grants, in percent of GDP): 2017: 34.2; 2018: 38.8; 2019: 39.9; 2020: 39.0\n  - Expenditure (in percent of GDP): 2017: 35.6; 2018: 33.1; 2019: 34.1; 2020: 34.0\n  - Current expenditure: 2017: 25.3; 2018: 19.1; 2019: 22.5; 2020: 25.2\n  - Capital spending and net lending: 2017: 10.3; 2018: 14.1; 2019: 11.6; 2020: 8.8\n  - Fiscal balance (in percent of GDP): 2017: -1.4; 2018: 5.6; 2019: 5.8\n  - Non-oil primary fiscal balance (in percent of non-oil GDP): 2017: -30.9; 2018: -32.1; 2019: -31.0; 2020: -30.2\n  - General government gross debt (direct borrowing): 2017: 18.8; 2018: 19.2; 2019: 17.9\n  - General government gross debt including guarantees: 2017: 53.2; 2018: 48.4; 2019: 50.3; 2020: 46.2\n- Money and credit\n  - Broad money (including foreign currency deposits, percentage change): 2017: 9.0; 2018: 11.3; 2019: 7.2; 2020: 6.0\n  - Bank credit to the private sector (percentage change): 2017: -28.1; 2018: 14.9; 2019: 6.8; 2020: 8.2\n- Balance of payments\n  - Current account balance (in percent of GDP): 2017: 4.1; 2018: 12.9; 2019: 10.4; 2020: 10.9\n  - Foreign direct investment (in percent of GDP): 2017: 0.7; 2018: -1.7; 2019: 4.8; 2020: 4.5\n  - Gross international reserves (in months of non-oil imports): 2017: 4.7; 2018: 5.7\n- Exchange rate\n  - REER (average, percentage change): …\n\nIMF Communications Department, Press Release No. 19/249, June 27, 2019. IMF staff mission led by Ms. Natalia Tamirisa.\n\n---\n\n Content in this bundle\n\n- Pr19249 Aze Azerbaijan\n  - Pr19249 Aze Azerbaijan (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Pr19249 Aze Azerbaijan (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Republic of Azerbaijan and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/06/27/pr19249-azerbaijan-imf-staff-completes-2019-article-iv-mission"
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    "Published: June 27, 2019",
    "An IMF team led by Ms. Natalia Tamirisa visited Azerbaijan during June 12–27, 2019, to conduct discussions for the 2019 Article IV Consultation.",
    "End-of-Mission press releases convey preliminary findings after a visit; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.",
    "Key high-level recommendations:",
    "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 is recommended to save an adequate portion of exhaustible oil income for future generations and build buffers.",
    "The government’s introduction of the fiscal rule in 2019 is recognized as a major step forward and should be complemented by:",
    "A gradual pace of consolidation, coupled with improving the efficiency of public spending and rebalancing composition toward growth-friendly investment in physical and human capital, is advised to mitigate adverse impacts.",
    "Close oversight of state-owned enterprises (SOEs) and the financial sector is needed to 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 absorb shocks and encourage better risk management.",
    "Complementary measures include modernizing monetary operations and increasing issuance of local currency securities to:",
    "Urgent financial sector priorities:",
    "Improving medium-term growth, job prospects, and diversifying the economy require deepening and broadening structural reforms to increase the role of the private sector and improve governance and transparency.",
    "Recommended actions:",
    "Output",
    "Employment",
    "Prices",
    "General government finances",
    "Money and credit",
    "Balance of payments",
    "Exchange rate",
    "**Pr19249 Aze Azerbaijan**",
    "[Republic of Azerbaijan and the IMF](http://www.imf.org/external/country/AZE/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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