The World Bank (WB) has reconsidered forecasts for Azerbaijan’s economy in 2021-2022, according to the latest World Bank Economic Update for Europe and Central Asia.
According to the forecast, economic growth in Azerbaijan will make up 2.2 percent in 2021, and will accelerate to 2.4 percent in 2022.
The country's agricultural sector this year has been predicted to show growth at 5.5 percent, and in 2020-2021 - at 5.4 percent.
Due to the WB estimates, the growth of industrial production in 2021 and 2022 will be 0.7 and 0.1 percent, respectively.
The growth of services will be 0.1 percent in 2020, 4.1 percent in 2021, and 5.6 percent in 2022.
The World Bank predicts average annual inflation in Azerbaijan at the level of 3.3 percent in 2020, with consequent slowdown to 2.9 percent – next year, and 2.8 percent - in 2022.
The current account deficit is projected at 7 percent of GDP for 2020, with consequent decrease to 4.3 percent of GDP for 2021, and 3.4 percent of GDP for 2022. Direct foreign investments to Azerbaijani economy will make up 1.4 percent in 2020-2021, and 1.2 percent of the annual GDP in 2022.
According to the bank, gas production growth (27.7 percent) and steady growth of non-oil sector (3.5 percent) increased economic activity of Azerbaijan in 2019 (to 2.2 percent), the best ever figures since 2014.
On the demand side, the investments remained anemic despite a boost in the population’s real incomes as a result of increasing central government expenditures, which supported consumption.
The inflation level remained at a low level in 2019 and early 2020. Amid inflation within the CBA’s (Central bank of Azerbaijan) target range of 4 ± 2 percent, the CBA continued reducing the discount rate through 2019 and early 2020, cutting it to 7.25 percent.
WB report notes that COVID-19 and the collapse of oil prices are current challenges for the economy of Azerbaijan. In addition to the adverse health effects for citizens, these challenges will affect the country's economy in the form of reduced oil export revenues, decreased trade and financial flows, cut revenues from the tourism sector. However, the available reserves (about 100% of GDP) and low state debt allow Azerbaijan to maneuver in these conditions.
According to the WB estimates, the current situation requires from Azerbaijan to undertake consistent and coordinated actions. Moreover, good public awareness and implementation of an active private sector diversification strategy are also important.
Azerbaijan’s GDP made up 2.2 percent in 2019.
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