By Rasana Gasimova
The International Monetary Fund (IMF) forecasts that Azerbaijan’s GDP growth will reach 2.5 percent in 2020-2024.
The IMF executive board drew its conclusion after consultations on Article IV with the government of Azerbaijan on September 6.
“Economic growth will reach 2.7 percent in 2019 due to increased hydrocarbon production and strong domestic demand. Over the medium term, GDP growth will be 2.5 percent, “the document states.
In 2020, the GDP will slow down to 2.1 percent, according to the materials published on the Fund’s website,
GDP growth in 2021 will amount to 2.1 percent; it will reach 2.2 percent in 2022, 2.3 percent in 2023, and 2.5 percent in 2024.
At the same time, growth in the non-oil sector in 2019-2021 will amount to 3.2 percent, 3.3 percent, and 3.4 percent, respectively, and 3.5 percent per year for the period 2022-2024.
There will be a 2.5 percent growth in the oil sector in 2019. In 2020-2024 it will reach 1.2 percent per year.
IMF’s document states that the nominal GDP of Azerbaijan will be $ 47.2billion in 2019, $48.2 billion in 2020, and $57.6 billion in 2024.
Based on the forecasts of the Fund, the average annual inflation in Azerbaijan will be 3.2 percent in 2019, 3.3 percent in 2020, and 3.5 percent in 2024.
According to the results of 2019, the IMF forecasts a current account surplus of the balance of payments of Azerbaijan at the level of 9.7 percent of GDP (12.9 percent of GDP in 2018), 10 percent of GDP in 2020, 7.7 percent of GDP in 2024.
Foreign direct investment in the Azerbaijani economy is projected at 5 percent of GDP in 2019, 4.7 percent of GDP in 2020, and 4.3 percent of GDP in 2024.
The IMF notes that there are still certain risks in the economy of Azerbaijan: structural problems, weaknesses in management and lack of transparency, fragility of the banking system.
“But Azerbaijan has opportunities to respond to adverse shocks, given the significant reserves and foreign assets,” the Fund emphasizes.
Fund directors also highly appreciate the actions of the Azerbaijani authorities in pursuing a policy aimed at eliminating the consequences that arose during the crisis (in 2015-2016 due to a strong drop in oil prices on world markets).
The IMF also calls on the Azerbaijani authorities to continue diversifying the economy, increasing its potential and resistance to shocks.
The IMF agrees that strengthening financial supervision and stimulating competition in the banking sector of Azerbaijan is crucial for the recovery of the sector and the effective implementation of intermediary functions to stimulate economic growth.
“Directors emphasized the importance of continuing structural reforms to help diversify the economy and develop the private sector. In this context, they welcomed progress in improving the business environment and called on the authorities to continue efforts for more open economy,”the document says.
The document also made a number of recommendations. Particularly, the IMF calls for continuing fiscal consolidation, easing monetary policy, ensuring exchange rate flexibility, promoting inclusive growth, and strengthening state institutions.
According to the Fund’s estimates, Azerbaijan has the opportunity to move to a new model of economic growth and increase its resistance to external risks.
“The country's economy has gradually recovered. The situation in the banking sector has stabilized. However, the economy is still heavily dependent on hydrocarbon exports and government expenditure. Financial intermediation remains weak, and the current exchange rate continues to encourage dollarization as insurance against devaluation and high inflation," the IMF said.
The Fund believes that the future of Azerbaijan depends on the ability to promote competition, improve governance and transparency.
For 2019, the Azerbaijani government forecasts GDP growth at the level of 3.2 percent, 2.4 percent in 2020, 3.8 percent in 2021, 3 percent in 2022, and 2.7 percent in 2023.
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