Press Release No. 14/107

Press Release No.14/107
March 18, 2014

An International Monetary Fund (IMF) mission lead by Raja Almarzoqi visited Baku during March 4-17, 2014 to conduct 2014 Article IV consultation discussions. The team met with the Minister of Finance, Chairman of the Central Bank of Azerbaijan (CBA), other high level senior officials, and representatives of the private sector, civil society, and the diplomatic community

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

“The success of the government’s debut Eurobond amid market turbulence in the region is a testimony of investors’ confidence in Azerbaijan’s prudent management of the oil windfall. The key challenge ahead is reducing the oil dependence, while fostering a diversified private sector-led growth.

“The near-term economic prospects for 2014-15 are favorable, with growth of non-oil gross domestic product at around 8 percent and inflation stable at a low single digit level. A fall in oil prices with a potential deterioration in the global outlook and key emerging markets is the main risk.

“The fiscal policy tightening envisaged in the approved 2014 budget is welcome and should be followed by a decisive medium-term fiscal consolidation strategy. This would free up resources for private investment, thereby helping to diversify the economy away from oil dependency.

“The intention of the Central Bank of Azerbaijan (CBA) to keep monetary policy in a neutral stance is well placed, as are its initiatives to slow the growth in consumer loans. Yet these measures should be monitored closely. Recent measures taken by the CBA to strengthen financial regulations will help ensure financial stability, but further actions are needed to increase the resilience of the system and competition in interest margins.

 “Actions to strengthen the rule of law (independence of the judicial system) and broaden anti-corruption efforts, along with a new competition code that eliminates formal protection for certain business, would help create a competitive private sector-led non-oil economy.

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

Azerbaijan: Selected Economic and Financial Indicators, 2010–15
	2010	2011	2012	2013	2014	2015
			Prel.	Proj	Proi,	Proi,
National income
GDP at constant prices	5.0	0.1	2.2	5.8	5.0	4.6
Of which: Oil sector 1/	5.0	-9.8	-5.3	0.5	-0.1	-0.1
Non-oil sector 2/	7.6	9.4	9.6	9.9	8.3	7.5
Consumer price index (end of period)	7.9	5.6	-0.3	3.6	3.4	4.5
Consumer price index (period average)	5.7	7.9	1.0	2.4	3.5	4.0
Money and credit
Net foreign assets	34.6	68.7	5.6	19.9	16.4	3.4
Net domestic assets	13.5	2.8	40.3	8.7	13.8	38.2
Domestic credit	8.4	7.9	39.6	4.3	10.8	15.4
Of which: Credit to private sector	6.6	18.1	20.8	27.6	10.3	15.1
Manat base money	31.6	29.4	27.1	10.7	12.7	9.5
Manat broad money	34.8	32.5	25.5	19.0	14.7	14.1
Total broad money	21.9	32.1	20.6	15.4	13.9	20.0
Foreign currency deposits ratio to broad money	21.2	20.9	17.7	15.1	14.5	13.2
Velocity of total broad money (M3) 3/	2.8	2.6	2.3	2.3	2.3	2.3
External sector (in US$)
Exports f.o.b.	25.5	30.3	-5.4	-1.0	-1.9	-5.8
Of which: Oil sector	25.7	30.9	-6.7	-1.0	-1.9	-6.7
Imports f.o.b.	3.6	50.7	3.1	0.2	7.2	8.8
Of which: Oil sector	19.6	35.5	-5.9	6.8	31.0	32.1
Export volumes	-1.4	-3.3	-6.0	-0.1	-1.9	0.0
Import volumes	-4.0	38.2	6.1	0.9	9.2	9.9
Terms of trade	27.1	30.7	3.6	-0.2	1.8	-4.9
Real effective exchange rate	1.1	2.6	0.8	3.0	…	…
Gross investment	18.5	21.2	22.7	23.7	23.2	22.6
Consolidated government	12.5	16.0	16.1	17.3	17.0	16.5
Private sector	6.1	5.1	6.7	6.4	6.3	6.1
Of which: Oil sector	1.9	2.1	3.1	3.0	2.9	2.8
Gross domestic savings	52.5	54.1	50.7	48.2	43.9	37.2
Gross national savings	46.6	47.6	44.5	43.4	38.2	32.5
Consolidated government	27.1	29.7	20.9	18.3	17.3	13.3
Private sector 4/	19.5	18.0	23.6	25.1	21.0	19.2
Consolidated central government finance
Overall fiscal balance	14.6	13.3	4.9	1.0	0.3	-3.1
Non-oil primary balance, in percent of non-oil GDP	-36.3	-40.3	-45.4	-45.0	-43.2	-41.8
External sector
Current account (- deficit)	28.0	26.5	21.8	19.7	15.0	9.9
Foreign direct investment (net)	0.6	1.4	1.1	-0.9	0.5	1.9
Public and publicly guaranteed external debt outstanding	7.4	7.3	9.2	11.7	14.0	14.2
Memorandum items:
Gross official international reserves (in millions of U.S. dollars)	6,721	10,887	11,587	13,987	15,987	16,487
Nominal GDP (in millions of manat)	42,465	51,158	53,968	57,708	61,638	67,473
Nominal non-oil GDP (in millions of manat) 2/	22,243	25,393	29,766	34,051	38,144	42,850
Nominal non-oil GDP (in millions of USD) 2/	27,877	32,286	37,919	43,405	49,614	55,735
Nominal GDP per capita (in U.S. dollars)	5,847	7,106	7,538	8,160	8,823	9,679
Nominal GDP (in millions of U.S. dollars)	52,913	64,819	68,700	73,537	79,363	87,763
Oil Fund Assets (in millions of U.S. dollars)	22,766	29,800	34,058	35,448	37,723	38,484
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), 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. Proj Proi, Proi,                 National income             GDP at constant prices 5.0 0.1 2.2 5.8 5.0 4.6 Of which: Oil sector 1/ 5.0 -9.8 -5.3 0.5 -0.1 -0.1 Non-oil sector 2/ 7.6 9.4 9.6 9.9 8.3 7.5 Consumer price index (end of period) 7.9 5.6 -0.3 3.6 3.4 4.5 Consumer price index (period average) 5.7 7.9 1.0 2.4 3.5 4.0 Money and credit             Net foreign assets 34.6 68.7 5.6 19.9 16.4 3.4 Net domestic assets 13.5 2.8 40.3 8.7 13.8 38.2 Domestic credit 8.4 7.9 39.6 4.3 10.8 15.4 Of which: Credit to private sector 6.6 18.1 20.8 27.6 10.3 15.1 Manat base money 31.6 29.4 27.1 10.7 12.7 9.5 Manat broad money 34.8 32.5 25.5 19.0 14.7 14.1 Total broad money 21.9 32.1 20.6 15.4 13.9 20.0 Foreign currency deposits ratio to broad money 21.2 20.9 17.7 15.1 14.5 13.2 Velocity of total broad money (M3) 3/ 2.8 2.6 2.3 2.3 2.3 2.3 External sector (in US$)             Exports f.o.b. 25.5 30.3 -5.4 -1.0 -1.9 -5.8 Of which: Oil sector 25.7 30.9 -6.7 -1.0 -1.9 -6.7 Imports f.o.b. 3.6 50.7 3.1 0.2 7.2 8.8 Of which: Oil sector 19.6 35.5 -5.9 6.8 31.0 32.1 Export volumes -1.4 -3.3 -6.0 -0.1 -1.9 0.0 Import volumes -4.0 38.2 6.1 0.9 9.2 9.9 Terms of trade 27.1 30.7 3.6 -0.2 1.8 -4.9 Real effective exchange rate 1.1 2.6 0.8 3.0 … … Gross investment 18.5 21.2 22.7 23.7 23.2 22.6 Consolidated government 12.5 16.0 16.1 17.3 17.0 16.5 Private sector 6.1 5.1 6.7 6.4 6.3 6.1 Of which: Oil sector 1.9 2.1 3.1 3.0 2.9 2.8 Gross domestic savings 52.5 54.1 50.7 48.2 43.9 37.2 Gross national savings 46.6 47.6 44.5 43.4 38.2 32.5 Consolidated government 27.1 29.7 20.9 18.3 17.3 13.3 Private sector 4/ 19.5 18.0 23.6 25.1 21.0 19.2 Consolidated central government finance             Overall fiscal balance 14.6 13.3 4.9 1.0 0.3 -3.1 Non-oil primary balance, in percent of non-oil GDP -36.3 -40.3 -45.4 -45.0 -43.2 -41.8 External sector             Current account (- deficit) 28.0 26.5 21.8 19.7 15.0 9.9 Foreign direct investment (net) 0.6 1.4 1.1 -0.9 0.5 1.9 Public and publicly guaranteed external debt outstanding 7.4 7.3 9.2 11.7 14.0 14.2 Memorandum items:             Gross official international reserves (in millions of U.S. dollars) 6,721 10,887 11,587 13,987 15,987 16,487 Nominal GDP (in millions of manat) 42,465 51,158 53,968 57,708 61,638 67,473 Nominal non-oil GDP (in millions of manat) 2/ 22,243 25,393 29,766 34,051 38,144 42,850 Nominal non-oil GDP (in millions of USD) 2/ 27,877 32,286 37,919 43,405 49,614 55,735 Nominal GDP per capita (in U.S. dollars) 5,847 7,106 7,538 8,160 8,823 9,679 Nominal GDP (in millions of U.S. dollars) 52,913 64,819 68,700 73,537 79,363 87,763 Oil Fund Assets (in millions of U.S. dollars) 22,766 29,800 34,058 35,448 37,723 38,484 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), 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.