IMF国际货币组织全球-Republic-of-Azerbaijan_2019-Article-IV-Consultation_72页_1mb

Summary of IMF Country Report No. 19/301: Republic of Azerbaijan

Core Content

The IMF Country Report No. 19/301 outlines the findings and recommendations of the 2019 Article IV Consultation with the Republic of Azerbaijan. The report evaluates the country's economic performance, policy responses, and future outlook, emphasizing the need for structural reforms and improved governance to ensure long-term growth and stability.

Main Views and Key Information

Economic Recovery and Performance

• Azerbaijan is recovering from a banking crisis and recession triggered by the prolonged decline in oil prices since 2014.
• Real GDP growth reached 1.4% in 2018 and 2.4% in the first half of 2019, driven by increased gas production and service sector activity.
• Inflation has remained subdued, below the midpoint of the target band (4±2%), due to lower food prices and a stable exchange rate.
• The Central Bank of Azerbaijan (CBA) has begun monetary easing, supported by anchored inflation expectations and a strengthening fiscal position.

Outlook and Risks

• Economic growth is expected to reach 2.7% in 2019, followed by a medium-term projection of 2.5%.
• Oil prices are expected to remain around $60 per barrel, supporting a sizeable current account surplus.
• Public debt is projected to decline relative to GDP.
• Risks to the outlook are tilted to the downside, though Azerbaijan has a strong net foreign asset position to respond to adverse shocks.
• Challenges include bank balance sheet fragility, structural rigidities, and governance weaknesses.

Policy Recommendations

• Fiscal consolidation should be gradual and growth-friendly, focusing on spending efficiency, tax rationalization, and revenue administration.
• The new fiscal rule should ensure spending discipline and reduce procyclicality.
• Monetary policy should be data-driven, with greater exchange rate flexibility to improve competitiveness and diversification.
• Financial sector reforms are crucial, including strengthening bank supervision, resolving non-performing loans (NPLs), and improving transparency.
• Structural reforms are necessary to promote inclusive, diversified, and private sector-led growth, including reducing administrative burdens, enhancing competition, and improving governance and transparency.

Key Economic Indicators

Key Policy Discussions

A. Rule-Based Fiscal Policy

• A new fiscal rule was introduced in 2019, requiring the non-oil primary balance (NOPB) to be no worse than the previous year's NOPB.
• Nominal spending growth is capped at 3% over the previous year's approved expenditures.
• "Spendable" oil revenues are constrained under the rule.
• The rule is part of broader public financial management (PFM) reforms, including a medium-term expenditure framework (MTEF), public debt management strategy, and budget classification law.

B. Supporting Monetary Policy

• The CBA has reduced the main refinancing rate by 73/4 pp to 81/4% since early 2018.
• A de facto peg on the exchange rate (ER) continues to encourage dollarization.
• The ER is expected to remain stable, and the CBA is moving toward an inflation targeting regime.

C. Financial Stability and Development

• The banking sector remains fragile, with continued weaknesses in balance sheets and supervision.
• NPLs have declined, and a new NPL resolution program is being implemented.
• FIMSA has increased on-site inspections and updated regulations, but regulatory forbearance persists.
• De-dollarization is progressing, and household deposits are rising.

D. Fostering Sustainable, Diversified, and Inclusive Growth

• The business environment has improved, with reforms in tax administration, labor regulations, and governance.
• Azerbaijan's Doing Business score improved by 8.45 points to 78.6.
• The government is implementing e-government, specialized business courts, and institutional reforms to support SMEs and market development.
• Structural reforms include WTO membership, OECD investment guidelines, and diversification away from oil.

Implementation of IMF Recommendations

Conclusion

The IMF Executive Board commended the policy response to economic challenges and encouraged continued efforts to diversify the economy, improve resilience, and enhance governance. While growth is expected to strengthen, risks remain, particularly in the financial sector and structural rigidity. Fiscal and monetary discipline, along with transparent governance, are essential for sustaining recovery and ensuring long-term stability.