Government signals optimism over economic growth rate

The Government of Azerbaijan expects positive changes in the economic growth rate in the near future.

Deputy Finance Minister Azer Bayramov announced about this during the discussions on execution of the 2016-state-budget at a meeting of the Parliamentary Committee on economic policy, industry and entrepreneurship. The changes, according to Bayramov, are forecasted on the background of the reforms ongoing in the country, as well as improvement of the situation in Azerbaijan’s neighbors/trade partners.

The deputy minister noted that the previous year was difficult for the global economy, which faced a number of challenges.

“As a result, the growth of global economy decreased by 0.3 percent compared to 2015and was 3.1 percent in 2016,” he added.

Bayramov further noted that the decline in prices for hydrocarbon raw materials caused difficulties for oil-exporting countries. Moreover, the US Federal Reserve System continued the policy of raising the interest rate, which led to a rise in the price of U.S. dollar and additional problems for countries, currencies of which depend on the dollar.

“As a response to all these challenges, the head of state approved Strategic Road Maps of Azerbaijan’s national economy.The work being carried out under these Road Maps allowed us to neutralize the effect of negative processes of the previous year,” added the deputy finance minister.

In December 2016, President Ilham Aliyev signed a decree endorsing “Strategic Road Maps for the national economy and main economic sectors” which will allow define the development goals and priorities and ensure their proper and timely implementation.

These 12 Strategic Road Maps cover almost all sectors of the economy, including, development of the oil and gas industry, the manufacture and processing of agricultural products, the manufacture of small and medium entrepreneurship-level consumer goods, development of heavy industry and machinery, tourism, logistics and trade, vocational education and training, financial services, communication and information technologies and utilities.

Some 27 billion manats will be required to implement the strategic goals outlined in the documents.

Meanwhile, the Moody’s Investors Service has forecasted the Azerbaijani economy to grow 1.8 percent in 2018.

Moody’s analyst Petr Paklin, addressing the Moody's Annual Azerbaijan Summit on May 25, noted that Azerbaijan’s GDP growth is highly dependent on the level of oil prices.

If the oil prices remain at the level of above $50 per barrel, Azerbaijan will abandon its savings policy and increase the government investments, Paklin said.

He said that Azerbaijan still retains a number of positive factors influencing the assessment by Moody’s.

“First of all, Azerbaijan has big oil and gas reserves, significant volumes of foreign assets, as well as foreign exchange and gold reserves in the country’s State Oil Fund (SOFAZ) and the Central Bank (CBA). Besides, Azerbaijan has an acceptable level of debt burden, despite its growth in the last two years,” he added.

Azerbaijan’s foreign exchange reserves are about 100 percent of the country’s GDP, which exceeds the level of the country’s national debt by slightly more than twice, Paklin said, adding that this is a very impressive debt safety cushion that will help overcome stress.

The manat depreciated by half against the US dollar from 2014 to 2015, but the country has an oil fund SOFAZ with reserves worth nearly $37 billion. The Fund can provide a strong buffer to substitute for debt financing and keep the public debt ratio from rising above 40 percent, even if oil prices are slow to recover.