Azerbaijan withstands oil price shakes
By Nigar Orujova
The world is no longer the same, as many oil-producing countries are facing economic catastrophe as crude prices continue to drop. For resource-rich Azerbaijan, this scenario now serves as a test for the country’s economic and financial stability.
The high price of oil was not a good sign initially and today’s price is another extreme. The world is now putting up with a new reality of ‘$50 per barrel’ oil.
Fitch Ratings does not expect a further devaluation of Azerbaijan’s national currency after the nearly 34 percent devaluation in February.
While other CIS countries have devalued their currencies on a much greater scale, in the case of Azerbaijan, however, Fitch considers the probability of a repeated devaluation at below 50 percent.
In the meantime, the World Bank expects Azerbaijan's economy to grow at the level of two percent this year.
The crisis made clear who was ready for the changes and Azerbaijan is now showing its economic potential, despite a slowdown in oil production.
While the Organization of the Petroleum Exporting Countries is unable to reach concensus on this issue, oil producing countries and companies are fighting for survival.
Azerbaijan is less integrated into the international financial system and its currency has been stable for a long period.
Despite the global economic decline, the economy continues to grow in Azerbaijan, with a 5.7 percent increase in GDP in the first half of the year and a total volume of GDP amounting to 26.3 billion manat.
This figure is quite large when compared with major oil producer Kazakhstan, which reached only 1.7 percent GDP growth in the same period.
The diversification of the economy was a major challenge for oil-rich Azerbaijan, as the development of the non-oil sector was a major objective for its recent government reforms.
The non-oil sector continued its ambitious rise over the first six months of 2015 and grew by 9.2 percent, accounting for 66.9 percent of the total GDP.
The volume of value-added production in the extraction and processing of oil and gas amounted to 33.1 percent of GDP, increasing by 1.3 percent compared to the same period last year.
The trend on the diversification of economy has proven to be successful, as the country is developing other sectors and developing into a transport hub in the region, thanks to its favorable geographic position.
Amid very strong crisis tendency in the world and in particular in the post-Soviet area, Azerbaijan continues to maintain an investment grade rating according to Fitch Ratings, at a score of ‘BBB-’.
Meanwhile, international rating agencies have lowered the grade for major countries like Russia, France, Turkey, Kazakhstan, and Japan, whose economies cannot be compared with Azerbaijan.
The Land of Fire seems to be making moves in the right direction, and the numerous reforms are proving to yield positive results.
Fitch Ratings expects a rise in oil prices in the light of a U.S. production decline.
Whether or not this occurs, Azerbaijan must get used to the current economic situation, especially regarding the price of oil, so as to continue its path of systematic development.
__
Nigar Orujova is AzerNews’s staff journalist, follow her on Twitter: @o_nigar
Follow us on Twitter @AzerNewsAz