What economic growth awaits Azerbaijan?
By Abdul Kerimkhanov
The Azerbaijani economy has been showing a steady growth in recent years due to a thoughtful, independent policy of the government. This is evidenced in numerous reports and forecasts of global rating agencies.
The international rating agency Standard & Poor's (S&P) expects the Azerbaijani economy to grow by 2.3 percent in 2019, the agency's report said.
S&P confirmed the long-term and short-term sovereign credit ratings of Azerbaijan in foreign and national currency at the level of "BB+/B".
According to the forecasts, in 2020, the country's GDP will increase by three percent, and in 2021 - by 3.1 percent.
Azerbaijan’s nominal GDP in 2019 is expected to be 80 billion manats, and will continue to rise, reaching 84 billion manats in 2020 and 88 billion manats in 2021.
In addition, the agency is waiting for the acceleration of GDP growth per capita. So, in 2019, the growth will be 2.3 percent, in 2020 - three percent, and in 2021 - 3.1 percent.
“The stable outlook reflects our view on balanced risks for ratings over the next 12 months; we expect the authorities to continue to focus on macroeconomic stability, including fiscal regulation,” the agency said.
It is noted that the ratings of Azerbaijan are primarily supported by a strong fiscal position of the state, supported by a significant amount of foreign assets accumulated in the State Oil Fund (SOFAZ).
Meanwhile, the international rating agency Fitch Ratings said it expects the acceleration of the growth rate of the Azerbaijani economy in 2019.
The growth will mainly be supported by gas production within the framework of the second stage of development of the Shah Deniz gas and condensate field, as well as investments within the framework of the extension of the Azeri-Chirag-Guneshli contract. The growth of non-oil GDP will contribute to the development of tourism and agriculture.
"In 2019, the economy of Azerbaijan will grow faster with the restoration of public confidence and an increase in budget spending," the Fitch report on developing countries in Europe says. The government of Azerbaijan forecasts GDP growth in 2019 at the level of 3.6 percent.
The agency expects that the current account surplus will be 8.4 percent in 2019. According to Fitch, Russia's interest in importing Azerbaijani agricultural products, the sustainable development of the tourism sector and the opening of the SOCAR Carbamide plant will stimulate non-oil exports of goods and services in Azerbaijan this year.
Fitch notes the growth of Azerbaijan’s international reserves. In particular, the assets of the State Oil Fund of Azerbaijan (SOFAZ) increased by nine percent in January-October 2018 to $ 39 billion ($ 35.8 billion in 2017).
Agency analysts also note an improvement in the country's banking sector:
"The growth of lending in the country reached seven percent in 2018 with the support of lower interest rates, and capitalization increased by 19.5 percent [without considering the International Bank of Azerbaijan]," the report says.
The European Bank for Reconstruction and Development (EBRD) forecasts economic growth at the level of 3.5 percent in Azerbaijan in 2019. This was stated in the updated report of the bank "Regional economic prospects: in the shadow of trade conflicts."
The report notes that the economic recovery of Azerbaijan is supported by measures to ensure macroeconomic stability and high oil prices.
Azerbaijan is a country with a well-developed industrial sector. Industrial output accounts for almost 60 percent of GDP.
Azerbaijan has the richest reserves of oil and natural gas concentrated in the Absheron peninsula of the Caspian Sea, as well as directly in the Caspian Sea. There are also deposits of iron ore, shale, molybdenum, several mineral sources.
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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94
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