{ "title": "Azerbaijan - Staff Concluding Statement of the 2021 Article IV Mission", "publication": "IMF News, June 18, 2021", "sourceUrl": "https://www.imf.org/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission", "overlayPath": "/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/index.md", "summary": "Economic contraction and drivers:", "publishDate": "2021-06-18", "sections": [ { "heading": "Recent Developments, Outlook, and Risks", "content": "- Economic contraction and drivers:\n - Economic activity contracted by 4.3 percent in 2020, driven by the hydrocarbon, contact-intensive and transportation sectors.\n - Inflation remained low, under 3 percent in 2020.\n - Fiscal balance moved from a sizable surplus in 2019 to a large deficit in 2020.\n - Current account balance weakened in 2020.\n- Policy response:\n - Increased health spending and a sizeable economic relief package helped save lives and livelihoods and cushion the economic impact from the pandemic and the decline in oil prices.\n- Outlook and risks:\n - Vaccination is expected to help defeat COVID-19 and support the recovery.\n - GDP growth is projected to pick up to 2.3 percent in 2021, as the sectors affected by stringent lockdown re-open.\n - The new Southern Gas Corridor pipeline will boost exports of natural gas, mitigating the decline in oil production.\n - Inflation is projected to increase moderately to around 4 percent.\n - Consolidated budget deficit is projected to remain high at 5.6 percent of GDP in 2021, owing to continued COVID-19 spending and increased reconstruction spending, before starting to narrow in 2022.\n - Higher oil prices should improve the current account, turning it to a surplus of 2.4 percent of GDP, from a small deficit in 2020.\n- Risk assessment:\n - Risks to the outlook are broadly balanced, although uncertainty about the future of the pandemic remains high." }, { "heading": "Fiscal Policy — Findings and Recommendations", "content": "- Findings:\n - The authorities suspended the fiscal rule and rolled out a substantial fiscal package in response to the COVID-19 pandemic.\n - Allowing the fiscal balance to move from a surplus to deficit in 2020-21 was judged appropriate given the severity of the shocks.\n- Near-term guidance:\n - Priority is to defeat COVID-19 and support the economy until the recovery is firmly underway.\n - Fiscal policy needs to remain flexible; if downside risks materialize, automatic stabilizers should be allowed to operate and additional, targeted relief should be provided as needed.\n- Longer-term recommendations:\n - Fiscal policy needs to shift to gradual and growth-friendly consolidation.\n - Share oil wealth with future generations to ensure intergenerational equity given projected decline in oil resources.\n - Improvements in the efficiency of public spending, generalized subsidies, public employment, and taxation could support fiscal consolidation.\n - Ensure adequate and well-targeted social spending to protect the most vulnerable and improve inclusiveness and productivity.\n - Reintroduce the fiscal rule, improve public financial management and reporting, and strengthen fiscal risk and SOE oversight and governance to underpin a sustainable and credible fiscal policy course." }, { "heading": "Monetary and Financial Policies — Findings and Recommendations", "content": "- Findings:\n - Monetary policy has been appropriately eased in response to the pandemic.\n - Interest rate cuts, in the context of the de facto peg to the U.S. dollar, and easing of prudential regulation complemented fiscal relief and kept credit flowing.\n - Bank lending rates eased only moderately and remain relatively high, amid weak monetary transmission.\n- Recommendations:\n - Gradual normalization of bank prudential and regulatory measures should continue, proceeding carefully in line with progress on combating the pandemic and re-opening the economy.\n - Further improvements in the CBA’s policy frameworks and initiatives to develop financial markets and improve financial intermediation and access to finance would support diversification, productivity, and resilience.\n - Continue CBA efforts to improve financial oversight, supported by cooperation with international financial organizations through technical assistance." }, { "heading": "Structural Reforms — Findings and Recommendations", "content": "- Findings:\n - Structural reforms are needed to boost productivity and long-term growth potential.\n - Diversifying the economy and promoting development of a dynamic nonhydrocarbon sector is crucial for boosting growth prospects and creating jobs.\n - Recent focus on improving governance and efficiency of state-owned enterprises is appropriate.\n- Recommendations:\n - Support SOE reforms with steps to promote competition, improve governance and transparency, and ensure access to finance.\n - Ensure sufficient funding for education, healthcare and social protection to help the workforce deal with pandemic scarring and prepare for long-term challenges posed by exhaustion of oil resources, digitalization and climate change.\n - Implement comprehensive structural reforms in line with recently approved national priorities for socio-economic developments to promote sustainable, inclusive, and green economic growth." }, { "heading": "Selected Economic Indicators and Projections (as reported)", "content": "- Demographics and key facts:\n - Population (2020 est.): 10.06 million\n - Literacy/Poverty rates: 100.0 (2018)/5.4 (2018)\n - Quota (in SDR million): 391.7\n - Per capita GDP (in US$, 2020): 4,232\n - Main products and exports: Oil, gas, and fruits.\n - Key export markets: Italy, Turkey, Israel\n- Projections and historical series (selected):\n - Real GDP growth (in percent): 2018: 1.5; 2019: 2.2; 2020: -4.3; 2021: 2.3; 2022: 1.7\n - Real non-oil GDP growth (in percent): 2018: 2.1; 2019: 3.3; 2020: -2.6; 2021: 3.5; 2022: 2.5\n - Real oil GDP growth (in percent): 2018: 0.5; 2019: 0.4; 2020: -7.2; 2021: 0.2; 2022: (not listed)\n - Unemployment rate (in percent): 2018: 4.9; 2019: 4.8; 2020: 6.5; 2021: 5.8; 2022: 5.7\n - Consumer price index (period average): 2018: 2.7; 2019: 2.8; 2020: 4.0; 2021: 3.2; 2022: (not listed)\n - Revenue (including grants, in percent of GDP): 2018: 38.6; 2019: 41.5; 2020: 33.8; 2021: 31.7; 2022: 33.5\n - Expenditure (in percent of GDP): 2018: 33.1; 2019: 33.3; 2020: 40.4; 2021: 37.2; 2022: 36.5\n - Current expenditure (in percent of GDP): 2018: 19.1; 2019: 21.6; 2020: 28.8; 2021: 27.2; 2022: 27.6\n - Capital spending and net lending (in percent of GDP): 2018: 14.0; 2019: 11.7; 2020: 11.6; 2021: 10.0; 2022: 8.9\n - Fiscal balance (in percent of GDP): 2018: 5.5; 2019: 8.2; 2020: -6.6; 2021: -5.6; 2022: -3.0\n - Non-oil primary fiscal balance (in percent of non-oil GDP): 2018: -31.7; 2019: -27.2; 2020: -30.3; 2021: -32.1; 2022: -30.2\n - General government gross debt (direct borrowing) 1/: 2018: 18.7; 2019: 17.7; 2020: 21.4; 2021: 30.6; 2022: 31.4\n - General government gross debt including guarantees: 2018: 48.2; 2019: 47.7; 2020: 54.1; 2021: 46.0; 2022: 44.4\n - Broad money (including foreign currency deposits, percentage change): 2018: 19.9; 2019: 1.1; 2020: 8.3; 2021: 6.4\n - Bank credit to the private sector (percentage change): 2018: 14.9; 2019: 15.2; 2020: -0.7; 2021: 5.0; 2022: 9.1\n - Current account balance (in percent of GDP): 2018: 12.8; 2019: -0.5; 2020: 2.4; 2021: 1.9\n - Foreign direct investment (in percent of GDP): 2018: -1.7; 2019: -2.9; 2020: -1.8; 2021: 0.8; 2022: 1.0\n - Gross international reserves (in months of non-oil imports): 2018: 4.7; 2019: 5.4; 2020: 6.8; 2021: 5.9\n - REER (average, percentage change): 2018: 3.1; 2019: 3.9; 2020: 4.5\n- Note on debt reporting:\n - 1/ Starting in 2021, includes guarantees issued to Aqracredit for its acquisition of distressed assets from the IBA.\n\nAzerbaijan - Staff Concluding Statement of the 2021 Article IV Mission, June 18, 2021.\n\n---\n\n\n References\n\n- Republic of Azerbaijan and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/bundle-manifest.json)", "Published: June 18, 2021", "Economic contraction and drivers:", "Policy response:", "Outlook and risks:", "Risk assessment:", "Findings:", "Near-term guidance:", "Longer-term recommendations:", "Findings:", "Recommendations:", "Findings:", "Recommendations:", "Demographics and key facts:", "Projections and historical series (selected):", "Note on debt reporting:", "[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)", "[Mission Concluding Statements](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)" ], "alternates": { "markdown": "/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/index.md", "json": "/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2021/06/18/mcs061821-azerbaijan-staff-concluding-statement-of-the-2021-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T00:28:58.525Z" }