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ADB: Economic growth in Azerbaijan to accelerate [UPDATE]

3 April 2019 10:08 (UTC+04:00)
ADB: Economic growth in Azerbaijan to accelerate [UPDATE]

By Mirsaid Ibrahimzade

Asian Development Bank in its April report entitled "Asian Development Outlook (ADO) 2019: Strengthening Disaster Resilience" provided information on current financial indicators of Azerbaijan and forecasts for further changes in them.

According to the publication, Azerbaijan’s GDP growth rate will reach 2.5 percent in 2019 and 2.7 percent in 2020 years. For comparison, the growth in 2018 stood at the level of 1.4 percent .

"GDP growth strengthened in 2018 as expansion in services and agriculture continued, and as industry contracted less. Exchange rate stability tamed inflation, and higher oil prices widened the current account surplus. Growth is forecast to inch higher in 2019 and 2020 on expanded public spending, gas production, and non-petroleum output, with inflation rebounding slightly in both years and higher gas exports further widening the current account surplus. Improving infrastructure is an important challenge," said the report.

“On the supply side, industry is forecast to grow by 1 percent each year, driven by manufacturing and gains in mining from higher gas production,” the report noted. “Construction is expected to expand by 3 percent in 2019 to accommodate additional government programs for agriculture and housing and by 2 percent in 2020 with the implementation of regional development programs.”

“Agriculture is projected to expand by 3 percent in 2019 and by 4 percent in 2020 as farmers’ access to finance improves,” the ADB said. “Growth in services is projected at 3 percent in both 2019 and 2020 on gains in transportation, tourism, and retail trade.”

On the demand side, a higher government salary bill will boost public consumption, while higher effective household income from growth should fuel private consumption, especially as inflation stays fairly moderate, according to the report.

On the demand side, a higher government salary bill will boost public consumption, while higher effective household income from growth should fuel private consumption, especially as inflation stays fairly moderate, according to the report.

Inflation is projected to accelerate to 4 percent in 2019 in line with higher salaries and, as faster growth boosts domestic demand, reach 5 percent in 2020, according to the report.

“A relatively stable exchange rate should prevent high inflation,” said the report. “Over the next 2 years, the central bank is expected to focus on two objectives: maintaining exchange rate stability and limiting inflation to 5 percent. The authorities will therefore closely monitor import demand, foreign exchange movements, and capital flows. A stable exchange rate is expected to boost lending to the private sector. If the inflation target is attained, the central bank can be expected to ease the policy interest rate further.”

It is vital to note that report also includes information about promising prospects of Azerbaijani policy of improving infrastructure. There was said that capital investments have so far focused on reconstructing and expanding road and railway networks, ports, and electric power plants. Most investment has gone into improving the country’s East–West and North–South transport corridors toward fashioning Azerbaijan as a major transit and trade hub. Despite the creation of good transport and electric power networks, along with massive investments in other public utilities, some gaps in infrastructure remain. Investment is still needed to replace and upgrade infrastructure for agriculture, rail transport, tourism, and information technology, among other needs. So the government has estimated that investment of nearly $7 billion, or 4.7 percent of GDP, is required during 2017–2020 for these purposes.

The main objective of the Asian Development Bank (ADB) is to support the economic development of member countries and to help alleviate poverty and improve the living standards of the population.

Azerbaijan joined ADB in 1999 and its share in the bank is 0.5 percent. In 2004, the Bank's local representative office was opened in our country. Azerbaijan hosted the 48th Annual Meeting of the Board of Governors of the Bank in 2015.

ADB has provided a $ 5.1 billion loan, guarantee, grant and technical assistance for the country, so far.

ADB’s program for Azerbaijan during 2011–2017 consisted of 47 projects. Energy was the largest sector supported, accounting for 42 percent ($2.1 billion) of total financing followed by transport, at 27 percent ($1.4 billion).

The Asian Development Bank will allocate $ 815 million from its credit resources to Azerbaijan in 2019-2021. This is stated in the bank's three-year business plan. Thus, in 2019, the bank will allocate $ 250 million to the country, $ 265 million in 2020, and $ 300 million in 2021.

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