EBRD forecasts 3.5 percent growth in Azerbaijan’s economy
By Nigar Orujova
Azerbaijan's economy is expected to grow by 4.5 percent in 2013, and show slightly more moderate growth in 2014.
The news was announced on November 11 by the European Bank for Reconstruction and Development (EBRD) in its latest Regional Economic Prospects report.
Growth has accelerated in Azerbaijan due to the stabilized oil outputs and sizable fiscal stimulus deployed ahead of the October Presidential elections, the Bank said.
According to the report, Azerbaijan's economy is expected to grow by 4.5 percent by the end of 2013, 3.5 percent higher that the previous forecast in May.
However, growth in 2014 is set to cool down to 3.5 percent as macroeconomic policies are normalized following the elections, and the recovery of oil output is completed.
"Azerbaijan's economy has accelerated in the course of the year, led by significant pre-election fiscal and monetary stimulus. The pace of hydrocarbon extraction has stabilized after the contraction of the past two years," EBRD said.
The non-oil sector, supported by public spending and a credit boom, has expanded at double-digit rates and is at risk of overheating, the Bank highlights.
According to the Bank, once macroeconomic policies are normalized following the Presidential elections and the recovery of oil output is completed, growth rate is likely to stabilize at around 3-4 percent in the next year.
The region has been affected by the unfavorable global economic environment and, in some cases, by domestic and international policy instability, the report said.
According to the EBRD, growth in Eastern Europe and Caucasus has remained constrained by a difficult external environment and domestic policy uncertainty.
"Ukraine has been in recession since the third quarter of 2012, and external vulnerabilities have increased as central bank reserves have fallen to around 2.5 months of imports. Growth has also slowed down considerably in Armenia, Belarus and Georgia," the report said.
The Bank forecasts inflation in Azerbaijan at 2.7 percent in 2013, compared to 3.4 percent in the May forecast. Azerbaijan's inflation rate was at 1.1 percent in 2012.
So far, the EBRD has given $2.1 billion worth of loans to Azerbaijan for 134 projects. Around $1.4 billion has been spent on supporting 125 projects in the private sector.