## IMF Staff Completes 2019 Article IV Mission to Azerbaijan

_IMF News, June 27, 2019_

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**Canonical URL:** [IMF Staff Completes 2019 Article IV Mission to Azerbaijan](https://www.imf.org/en/news/articles/2019/06/27/pr19249-azerbaijan-imf-staff-completes-2019-article-iv-mission)

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## Bibliographic details
- Published: June 27, 2019

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### Mission summary and main messages
- 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:
  - Gradual and growth-friendly fiscal consolidation to share exhaustible oil wealth with future generations and strengthen buffers to deal with future shocks.
  - Move towards inflation targeting and continue strengthening financial sector oversight to improve risk management and foster financial market development.
  - Continue reforms to ease the business environment and improve policy frameworks, governance, and transparency to support diversified, private-sector led, and inclusive growth.

### Macroeconomic outlook and projections
- 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.

### Fiscal policy and public finances
- 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:
  - Stronger public financial management.
  - Better fiscal transparency.
  - Management of fiscal risks.
- 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.

### Monetary policy and financial sector recommendations
- 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:
  - Foster financial market development.
  - Facilitate financial sector liquidity management.
  - Provide a benchmark for corporate bonds and a risk-free investment for the private sector.
- Urgent financial sector priorities:
  - Tackle high non-performing loans.
  - Upgrade financial sector regulations.
  - Strengthen financial sector supervision to improve confidence and prevent a build-up of future vulnerabilities.

### Structural reforms and inclusivity
- 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:
  - 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.
  - Enhance quality of education and healthcare to nurture a more productive workforce.
  - Ensure social measures are well-targeted.
  - Continue improving economic policy frameworks and institutions to align policies with the authorities’ vision of private sector-led, diversified and inclusive economic growth.

### Selected Economic Indicators (Projections)
- Output
  - Real GDP growth (in percent): 2017: -0.3; 2018: 1.4; 2019: 2.7; 2020: 2.1
  - Real non-oil GDP growth (in percent): 2017: 2.4; 2018: 1.8; 2019: 2.8
  - Real oil GDP growth (in percent): 2017: -4.4; 2018: 0.6; 2019: 2.5; 2020: 1.2
- Employment
  - Unemployment rate (in percent): 2017: 5.1; 2018: ...
- Prices
  - Consumer price index (period average): 2017: 12.8; 2018: 2.3; 2019: 3.2; 2020: 3.3
- General government finances
  - Revenue (including grants, in percent of GDP): 2017: 34.2; 2018: 38.8; 2019: 39.9; 2020: 39.0
  - Expenditure (in percent of GDP): 2017: 35.6; 2018: 33.1; 2019: 34.1; 2020: 34.0
  - Current expenditure: 2017: 25.3; 2018: 19.1; 2019: 22.5; 2020: 25.2
  - Capital spending and net lending: 2017: 10.3; 2018: 14.1; 2019: 11.6; 2020: 8.8
  - Fiscal balance (in percent of GDP): 2017: -1.4; 2018: 5.6; 2019: 5.8
  - Non-oil primary fiscal balance (in percent of non-oil GDP): 2017: -30.9; 2018: -32.1; 2019: -31.0; 2020: -30.2
  - General government gross debt (direct borrowing): 2017: 18.8; 2018: 19.2; 2019: 17.9
  - General government gross debt including guarantees: 2017: 53.2; 2018: 48.4; 2019: 50.3; 2020: 46.2
- Money and credit
  - Broad money (including foreign currency deposits, percentage change): 2017: 9.0; 2018: 11.3; 2019: 7.2; 2020: 6.0
  - Bank credit to the private sector (percentage change): 2017: -28.1; 2018: 14.9; 2019: 6.8; 2020: 8.2
- Balance of payments
  - Current account balance (in percent of GDP): 2017: 4.1; 2018: 12.9; 2019: 10.4; 2020: 10.9
  - Foreign direct investment (in percent of GDP): 2017: 0.7; 2018: -1.7; 2019: 4.8; 2020: 4.5
  - Gross international reserves (in months of non-oil imports): 2017: 4.7; 2018: 5.7
- Exchange rate
  - REER (average, percentage change): …

*IMF Communications Department, Press Release No. 19/249, June 27, 2019. IMF staff mission led by Ms. Natalia Tamirisa.*

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## Content in this bundle

- **Pr19249 Aze Azerbaijan**
  - [Pr19249 Aze Azerbaijan (Markdown version)](/-/media/files/news/press-release/2019/pr19249-aze-azerbaijan.pdf.md){rel="alternate" type="text/markdown"}
  - [Pr19249 Aze Azerbaijan (PDF)](/-/media/files/news/press-release/2019/pr19249-aze-azerbaijan.pdf){rel="external" type="application/pdf"}

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## References

- [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/)
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_Source: https://www.imf.org/en/news/articles/2019/06/27/pr19249-azerbaijan-imf-staff-completes-2019-article-iv-mission_