Azerbaijan's economic growth in 2013 accelerated to 5.8 percent:ADB
By Aynur Jafarova
Azerbaijan's economic growth in 2013 accelerated to 5.8 percent from 2.2 percent in 2012, a report published by the Asian Development Bank (ADB) on April 1 said.
"On the supply side, rapid growth in non-oil activity and a resumption of growth in petroleum enabled industry to expand by 1.2 percent," ADB said.
The bank noted food processing, construction materials, and machinery all expanded, benefiting from significant public investment, bank lending, and support from the Entrepreneurship Support Fund.
ADB said in 2013 Azerbaijan's petroleum output rose by 1 percent. Construction expanded by 23 percent, supported by large public infrastructure projects and private investment. Agriculture grew by 4.9 percent as well.
"To stimulate local entrepreneurship in agriculture, the government continued to provide exemptions from taxation and customs duties. Services, representing about 30 percent of GDP, grew by 7.2 percent, reflecting gains particularly in trade, tourism, and catering," the bank stressed.
Rising incomes attributable to higher salaries and pensions and increased consumer lending fueled private consumption.
Touching on inflation, the bank noted the average annual inflation rose to 2.4 percent in 2013 from 1.1 percent in 2012 "as prices for services increased, reflecting higher civil service wages and expanding credit.
ADB believes Azerbaijan's improved tax administration contributed to tax revenues exceeding expectations. Total revenues increased by 12.8 percent from 2012 to 33.8 percent of GDP, up from 31.6 percent in 2012.
"Large salary increases, greater support to social services including health and education, and aggressive regional development activities raised total outlays to an estimated 33.1 percent of GDP from 31.8 percent in 2012," ADB said.
Also, hydrocarbons contribute 94.4 percent of export revenues.
"Exports declined by 1.8 percent in 2013, as lower global prices reduced oil export earnings, while imports, mainly of food and other consumption goods, rose by 9.4 percent. Accordingly, the trade surplus narrowed to $20.6 billion in 2013 from $22.2 billion in 2012," the bank stressed.
Foreign direct investment in Azerbaijan amounted to $6.3 billion, 82.4 percent of which went to the oil and gas sector.
"Strategic reserves-the sum of gross reserves in the central bank and SOFAZ assets-amounted to nearly $50 billion at the end of 2013. External public debt at the end of 2013 was estimated at $6.1 billion, or 8.2 percent of GDP," ADB noted.
Forecasts for 2014
ADB forecasts Azerbaijan's economic growth to slow to 5 percent in 2014 and decelerate further to 4.8 percent in 2015. This is because of an anticipated moderation in public expenditure and slowing expansion in the oil industry.
"Large public sector programs, including public investments in infrastructure, will continue to propel growth though declining oil prices and limited increases in production will constrain how much petroleum income can finance the promotion of other activities," ADB said.
The bank believes recently approved state programs for the development of Baku, the capital, and of the regions will identify new opportunities for public investments to diversify the economy.
ADB predicts Azerbaijan's industry will expand by 0.9 percent in 2014 and then slow to 0.5 percent growth in 2015.
The bank stressed in the report that the Azerbaijani government will continue its support to agriculture and will extend subsidies and concessional lending to farmers through its company Agro-leasing.
"Agriculture is expected to grow by 5.5 percent in 2014 and 5.7 percent in 2015, reflecting higher crop production. Services are projected to grow by 8 percent in 2014 and 8.5 percent in 2015 because of tourism and trade," the report noted.
Inflation is projected to accelerate to 4 percent in 2014, reflecting higher incomes and a rise in fuel tariffs, then moderate to 3.5 percent in 2015, ADB said.
"With stronger controls over consumer loans, banks are expected to promote lending to micro, small, and medium-sized enterprises," the report said.
"The current account balance is forecast to record a surplus of 16 percent of GDP in 2014 and 15 percent in 2015, reflecting continued sizable oil and gas exports. Imports are expected to grow by 3.4 percent in 2014 and 4 percent in 2015," the bank noted.
ADB believes agriculture in Azerbaijan has the potential to employ around 30 percent of total labor force, and generate additional income to reduce poverty and promote growth in rural areas.
"Making finance available in these areas, and using microfinance to reach underserved farmers and other poor households, is important for boosting rural income," ADB noted.