WB: Azerbaijan's economy to be affected by COVID-19, falling oil prices
By Ofeliya Afandiyeva
The World Bank (WB) forecasts 0.2 percent decline in Azerbaijani GDP for 2020 amid the coronavirus (COVID-19) pandemic and falling oil prices, local media reported on April 9 citing the Europe and Central Asia (ECA) Economic Update of WB.
In January 2020, the WB forecasted GDP growth in Azerbaijan at 2.3 percent.
However, according to the new estimates of the WB, economic growth in the country will be 2.2 percent and 2.4 percent accordingly in 2021-2022.
In addition, for the current year, the decline in industrial production will be 1 percent, in 2021 - 0.7 percent and in 2022 - 0.1 percent.
At the same time, the agricultural sector will grow by 5.5 percent this year and 5.4 percent annually in 2021-2022.
Growth in the service sector will be 0.1 percent in 2020, 4.1 percent in 2021 and 5.6 percent in 2022.
Based on the forecast of the WB, the average annual inflation in Azerbaijan will be 3.3, 2.9, 2.8 percent accordingly in 2020-2022.
Moreover, due to lower oil prices, the balance of payments deficit in 2020 will be 7 percent of GDP (surplus in 2019 amounted to 8.8 percent of GDP), in 2021 - the deficit will decrease to 4.3 percent of GDP, while in 2022 it will rise up to 3.4 percent of GDP.
In 2020-2021, foreign direct investment in the Azerbaijani economy will amount to 1.4 percent of GDP annually, and in 2022 - 1.2 percent.
According to WB estimates, the expansion of natural gas production and steady growth in non-energy sectors supported the growth of the Azerbaijani economy in 2019 (up to 2.2 percent).
“Long-term growth depends on continued domestic reforms aimed at strengthening the private sector, addressing vulnerabilities in the financial sector, as well as investing in human capital to improve the quality of education and reduce skills mismatch,” the statement said.
The WB urges that COVID-19 and falling oil prices are current challenges for the Azerbaijani economy.
“These challenges, along with unfavorable consequences for the health of citizens, negatively affect the economy by reducing revenues from oil exports, trade, and financial flows, and revenues from the tourism sector,” the statement stressed.
Along with it, the WB notes that the availability of reserves (about 100 percent of GDP) and low public debt allow Azerbaijan to maneuver in such conditions.
Besides, the Azerbaijani government forecasts GDP growth at 3 percent in 2020. However, the government has not yet released a new forecast for GDP growth amid the coronavirus pandemic and falling oil prices.
Note that in 2019, the GDP in Azerbaijan increased by 2.2 percent.
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