ADB expects increase in economic growth in Azerbaijan in 2021

  03 April 2020    Read: 934
  ADB expects increase in economic growth in Azerbaijan in 2021

High efficiency of allocation of budgetary funds will help Azerbaijan easily overcome difficulties, reports citing Trend. 

"Lower oil prices narrowed the current account surplus. A further decline amid the COVID-19 outbreak will slash growth in 2020 with growth recovering in 2021. The current account surplus will narrow in 2020 with lower oil prices and then widen in 2021 as oil prices recover," said the report.

The bank said Azerbaijan's government aims to reduce the ratio of external debt to GDP to 11 percent by 2025, in line with a debt management strategy approved in 2018.

"A decline in oil prices, amid the COVID-19 outbreak, will slash growth to 0.5 percent in 2020. A recovery in prices and higher oil and gas production are projected to raise growth to 1.5 percent in 2021," said the report.

"Expansion in industry, projected at 0.5 percent in 2020 and 2.0 percent in 2021, will come from stronger hydrocarbon performance, in particular higher output at the Shah Deniz II gas field with the completion in 2020 of the Trans Adriatic Pipeline to carry gas from Turkey to Italy. Growth in agriculture is expected to slow to 4.5 percent in 2020 and 4.0 percent in 2021, though continued subsidies for imports of fertilizer and seed should promote higher cash crop production. Services are expected to show little growth in 2020 as the COVID-19 outbreak hits tourism and retail trade, but they will expand by 1.0 percent in 2021 as the economy improves," the bank said.

"On the demand side, higher civil service income will fuel public consumption, and a 34 percent increase in minimum salaries should boost private consumption.Investment is expected to slow in 2020 as low oil income cuts public investment before stabilizing in 2021 as private investment picks up. Strong gas output will strengthen net exports, supporting growth," said the ADB.

The report said fiscal policy is expected to become more expansionary in 2020 with the budget deficit rising to at least 3.4 percent of GDP—or 17.2 percent when excluding transfers from SOFAZ—as higher social spending and continued strong public investment boost total expenditure by 10.2 percent.

"The budget originally projected revenue, including transfers from SOFAZ, equal to 29.4 percent of GDP in 2020, based on an assumed oil price of $55 per barrel. Actual revenue could be lower if March 2020 oil prices persist for the rest of the year. With changes in the tax code expanding tax collections, transfers from SOFAZ were originally projected to cover 47 percent of revenue in 2020 and 45 percent in 2021. The government projected SOFAZ to receive $12.4 billion in revenue from export earnings in 2020," said the bank.

The government allocated 147 billion manat ($86.5 billion) to regulate macroeconomic stability, the labor market and reduce the negative impact of coronavirus on entrepreneurship, the ADB noted.

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