Azerbaijan, Baku, April 6 / Trend, N.Ismayilova /
As oil prices are projected to go up in 2011 and remain high in 2012, the main challenge for the Azerbaijani government will be to maintain macroeconomic stability, the Asian Development Bank's (ADB) report titled "Asian Development Outlook 2011" says.
Growth in oil revenue will allow a continued rise in social expenditure and investment in infrastructure that should spur private activity and improve the investment climate.
The hydrocarbon economy is expected to grow steadily at about 3-4 percent in the forecast period as oil and gas development sets the stage for faster expansion in later years. Robust growth of the non-oil economy is expected to stay driven by public sector investment. The government plans to invest $4.2 billion in non-oil sector, which will be reason for rapid expansion in construction with positive knock-on effects on the rest of the economy.
Agriculture is seen growing steadily on the assumption of good weather and continued government support, including reductions in value-added tax on agricultural inputs and in the lending rate of the main agro-leasing company, and completion of irrigation and infrastructure initiatives. Growth of 8 percent is foreseen in the non-oil sector in 2011 and 2012. Overall GDP growth is projected at 5.8 percent in both years.
The Central Bank will aim to meet the credit demands of the non-oil economy while keeping consumer price inflation in check, though price rises will probably be driven mainly by external factors.
The exchange rate may come under some upward pressure because of larger surpluses in the balance of payments, but the CBA will resist a marked appreciation as it would retard non-oil export development. Inflation is seen reaching 7.5 percent in 2011 as global price pressures increase, gliding down to 7.0 percent in 2012 as they moderate.
The current account surplus is expected to be 27.8 percent of GDP in 2011 and 25.0 percent in 2012.