2014年-世界发展银行全球_Azerbaijan_Economic_Report_Spring_2014___Public_Investment_Still_Driving_Growth_24页_784kb

Azerbaijan: Public Investment Still Driving Growth (Spring 2014 Economic Report)

Core Content

This report outlines the economic and political developments in Azerbaijan during the fiscal year 2013 and provides an outlook for 2014. It emphasizes the role of public investment in sustaining economic growth, despite challenges in diversification and structural reforms.

Main Points

Political Developments

• Presidential Election 2013: President Ilham Aliyev was re-elected for his third term with 85% of the votes, marking a landslide victory. The election was disputed by international observers, with the OSCE and EU noting violations, while CIS countries considered it fair.
• Government Reorganization: The President retained most of his team, with some key changes in positions. The Ministry of Economic Development was renamed to the Ministry of Economy and Industry, and a new industrial development program was planned for 2014.
• "Year of Industry": The government announced 2014 as the 'Year of Industry', focusing on competition code adoption, special economic zones, and support for agriculture and other sectors.
• Nagorno-Karabakh Conflict: Peace talks resumed but no resolution is expected in the medium-term.

Economic Developments

• GDP Growth: Azerbaijan's GDP grew by 5.8% in 2013, driven by public investment and a modest increase in oil production (0.9%).
• Non-Oil Sector Growth: The non-oil economy contributed significantly to growth, with the construction sector expanding by 23%.
• Inflation: The inflation rate reached 3.5% by year-end, primarily due to fuel price hikes. It remained below the Central Bank's target of 5-6%.
• Trade Balance: The trade surplus decreased to 18% of GDP in 2013 from 20.7% in 2012. The non-oil trade deficit remained at 21% of GDP.
• External Accounts: The current account surplus narrowed to 15% of GDP, while the capital account deficit increased. The Oil Fund's assets stood at $35.8 billion, covering 50% of GDP.
• Employment: The unemployment rate declined slightly to 4.9% in 2013. New jobs were created mainly in construction, hotels, and retail. The oil sector contributes less than 1% to total employment.
• Poverty: The poverty rate fell to 5.3% in 2013, supported by social assistance programs. However, significant regional disparities in poverty rates persisted, with Guba-Khachmaz having the highest rate at 11%.

Fiscal Policy

• Fiscal Surplus: The fiscal surplus narrowed to 1.8% of GDP in 2013 from 4.2% in 2012, due to lower oil revenues and sustained expenditures.
• Public Investment: Public investments accounted for 14.3% of GDP in 2013, with the private sector contributing 11.6%. The 2014 budget signals a reduction in public investments, aiming for fiscal consolidation.
• Oil Fund: The Oil Fund's saving rate dropped to 10% in 2013 from 23% in 2012. It accounted for 28.7% of consolidated revenues in 2013, down from 30.9% in 2012.
• Social Spending: Social spending remained at 7% of GDP, with pensions accounting for half of all social transfers. The government increased social expenditures in 2014.

Monetary and Exchange Rate Policies

• Interest Rates: The Central Bank reduced the policy rate to 4.75% in 2013, and commercial bank interest rates dropped from 15.2% to 14.1%.
• Credit Growth: Credit expanded by 26% in 2013, led by consumer loans which increased by 45%. The central bank introduced stricter guidelines for consumer lending.
• Exchange Rate: The real exchange rate depreciated by 0.9% in 2013 due to a stable nominal rate and lower inflation than key trading partners.

Key Information

• Currency: Azerbaijani Manat (AZN), with 1 USD = 0.78 AZN.
• Fiscal Outlook: The 2014 budget is expected to reduce public investments and fiscal deficit, with a projected deficit of 4% of GDP.
• Structural Reforms: The government is focusing on improving the business environment, human capital, and infrastructure, but there are concerns about the effectiveness of sector-specific policies.
• Fiscal Dependence: The economy remains heavily dependent on oil, with oil revenues accounting for 72% of consolidated budget revenues in 2013.
• International Relations: Azerbaijan did not sign the EU Association Agreement in Vilnius but is considering a Strategic Modernization Partnership. It has no intention to join the Russian Customs Union.

Outlook

• Near-Term: Economic growth is expected to moderate to 4.5-5% per year due to limited progress in diversification and the likely decline in oil production.
• Medium-Term: Continued fiscal consolidation and efforts to increase non-oil revenues will be essential. The government is also planning to assess public expenditure and financial accountability in 2014.

Conclusion

While public investment continues to be a key driver of growth, the economy faces challenges in diversification and structural reform. The government's focus on specific sectors may not be effective, and fiscal sustainability remains a concern due to reliance on oil revenues and the depletion of the Oil Fund. The 2014 budget aims to address these issues through reduced public investment and increased non-oil revenue collection.