EBRD maintains outlook on Azerbaijan's GDP
By Leman Mammadova
European Bank for Reconstruction and Development (EBRD) expects that Azerbaijan's GDP will grow by 3.5 percent in 2019.
This was stated in the Bank’s May review of Regional Economic Prospects.
In November last year, EBRD also predicted Azerbaijan's 2019 GDP growth at the level of 3.5 percent.
The review notes revival of the country’s economy highlighting the increase in production in transport, real estate, non-oil industry, trade, agriculture, and information and communication services.
“The loan portfolio contraction leveled off in February 2018 and grew by 12.2 percent in nominal terms in the following year. In addition, despite the decline in loan and deposit dollarization, the rates remain high at 37.1 percent and 65 percent respectively, as of February 2019,” the report reads.
At the same time, the consolidated budget moved from a deficit of 1.5 percent of GDP in 2017 to a 5.9 percent surplus in 2018.
“Azerbaijan’s GDP growth was 1.4 percent in 2018 due to the increase in oil prices, as well as an increase in gas production and exports. Non-oil sector grew by 1.9 percent,” EBRD noted.
On the back of a stable exchange rate, supported by growing oil prices and tight management of manat against the U.S. dollar, inflation declined from an average of 12.9 percent in 2017 to 2.3 percent in 2018, allowing for further monetary policy relaxation, said the Bank.
According to the EBRD estimates, GDP grew by 3 percent in the first two months of 2019 compared to 2018 and the expected higher GDP growth rates in 2019–2020 will be associated with positive dynamics in the oil and gas sector. “We forecast the economy to grow by 3.5 percent in 2019 and 3.3 percent in 2020.”
It should be noted that the Azerbaijani government predicts the GDP growth at the level of 3.6 percent in 2019 and 3.8 percent in 2020.
EBRD is a leading investor in Azerbaijan. The country has been cooperating with EBRD since 1992 to achieve further economic development. One of the main priorities of EBRD in Azerbaijan is to support the local corporate sector with direct financing.
In total, the Bank has allocated almost 3.3 billion euros for projects in various sectors in Azerbaijan. The largest share of investments account for the energy sector (50 percent), while 42 percent accounts for infrastructure projects. The rest is for financial, industrial and commercial projects.
The Bank continues working with the Azerbaijani government and the private sector to make further investments in the country. At the moment, the number of active EBRD projects in Azerbaijan is 45, and in total, the EBRD has implemented 167 projects in Azerbaijan. The current portfolio of projects is worth 1.4 billion euros. Major share of investments accounts for to the private sector.
Recently, EBRD has introduced its new country strategy covering 2019-2024 to help Azerbaijan develop its non-oil sector, strengthen local lenders and boost investment in the green economy.
EBRD offers Azerbaijan to promote economic diversification by supporting competitiveness and effective management, according to the strategy.
Moreover, the document states that it is important to increase the sustainability of the financial sector, including capitalization, and to create a sustainable financing structure and sound risk management practices in the banking sector.
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Leman Mammadova is AzerNews’ staff journalist, follow her on Twitter: @leman_888
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