Azerbaijan’s near-term growth prospects are favorable: IMF
An International Monetary Fund (IMF) staff mission, headed by Raja Almarzoqi, visited Baku during November 8-20, 2012 to discuss recent economic developments, government policies and future prospects for the Azerbaijani economy.1 The discussions also paved the ground for the next Article IV Consultation mission, tentatively scheduled for late February 2013.
The IMF team met with senior government officials and representatives of the private sector, civil society and the diplomatic community. The mission thanks the authorities for their hospitality and the constructive discussions. The IMF mission said the near-term growth prospects are generally favorable. Non-oil growth, already at potential by end–year, could reach 10 percent in 2012 and remain strong at about 8 percent in 2013. Non-oil output primarily driven by the construction and services sectors has become considerably dependent on public spending.
Inflation has fallen to record levels but could rise with planned public spending and non-oil output beginning to exceed potential. 12-month inflation has declined sharply since end-2011 mainly driven by a fall in global food prices.
Revising the 2013 budget to embark on a fiscal consolidation path would contain risks to macroeconomic stability and strengthen the policy buffer to face a potential deterioration in the global economy. The 2013 budget bill implies an increase in the non-oil deficit and higher reliance on oil revenue. With output reaching potential, the mission recommends to take a more cautious approach on the oil-financed domestic spending by lowering the 2013 non-oil deficit to about 40 percent of non-oil GDP.