General economic situation in Azerbaijan (as of 2016)

A lot of events occurred in the Azerbaijani economy in 2016. In particular, Azerbaijan planned to pass to an economic model not to depend on oil in 2016.

The government mainly focused on the development of the country’s export potential in 2016, namely, the expansion of non-oil goods and services and the creation of more favorable conditions in the investment sphere.

Azerbaijan has recently invested billions in the development of marine, rail, automotive, communal, social infrastructure. As a result, Azerbaijan turned into a major transit country in the region.

An important event of 2016 was the coordination of the details of implementing the North-South corridor project, which will become a bridge to connect the railways of Iran, Azerbaijan and Russia. Thus, the expansion of the transport routes will further increase the country's attractiveness for investors by supplying the products produced in Azerbaijan to other markets.

Moreover, a tax burden is not so high in Azerbaijan as in other countries. The recent changes made in the licensing (the number of licensed kinds of activity greatly decreased and the amount of the state duty reduced twofold), tax simplification, the suspension of inspections of businesses for two years contribute to making investments in small and medium-sized businesses.

The modern enterprises were still established in the Azerbaijani non-oil industry in 2016 and 410 enterprises were opened in the country for the year.

The ground-breaking ceremony of the first pharmaceutical plant was laid in Azerbaijan in November 2016. This joint Azerbaijani-Russian project is the first of four pharmaceutical plants, the construction of which will begin before 2018. The ground-breaking ceremony of another plant was held in January 2017. The second plant is the Azerbaijani-Iranian joint project.

Azerbaijan and Iran also laid the foundation of the first joint car plant in the Neftchala Industrial Quarter in August 2016.

Azerbaijan’s AzEuroCar LLC and Iran’s giant automaker, Iran Khodro, will produce four Iranian car brands – Dena, Runna, Soren and Samand –at the new plant with a capacity of about 10,000 cars per year.

The project is estimated at $15 million, while 25 percent will be ensured by the Iranian side.

The light industry is another area in Azerbaijan which will be actively developed. Mingachevir will be the light industry center. The foundation of another industrial park was laid in September. Nine enterprises which will produce yarn, shoes, therapeutic skin care and make-up, clothing, etc., will be built on the territory. It will reduce dependence on import. Over 5,000 new jobs will be created.

The carpet weaving industry intensified in the country in 2016. Azerkhalcha company’s workshops are being built in 10 districts of the country. The workshops are expected to be built in the first half of 2017.

Agriculture is another area which was greatly developed in 2016.

Of course, Agriculture is not a new area for Azerbaijan, however, despite a long history of development, the share of agricultural sector in the country’s economy is only 5-6 percent.

The entrepreneurs have received the documents encouraging investments in Azerbaijan since May 2016. After obtaining the documents, the entrepreneurs receive different tax and customs benefits. The entrepreneurs will be exempt from land tax, VAT and customs duties while importing technological equipment for seven years. They will also pay 50 percent of profit tax and income tax.

The country’s president also approved measures to promote the Made In Azerbaijan brand in the world markets in October 2016. The mechanism of supporting manufacturers and exporters covers all phases beginning from production to the export of goods. The export missions were sent to China and the UAE as part of measures to promote the national brand. Those trips were successful. Thus, the Azerbaijani entrepreneurs will supply 500,000 bottles of wine to China a year.

The most important news appeared in late 2016.

Azerbaijani President Ilham Aliyev approved the "Strategic road maps for the national economy of Azerbaijan", which cover the areas of agriculture, trade and logistics, education, public services, ICT, affordable housing, small and medium business, heavy industry and engineering, tourism, financial services, oil and gas, as well as privatization December 6, 2016.

The country's GDP can be increased by more than 7 billion manat [excluding privatization] and 125,500 new jobs can be created as a result of taking those measures in the non-oil sector of the economy till 2020.

The volume of Azerbaijan’s GDP was 59.99 billion manat in 2016 that is by 3.8 percent less than in 2015, the country’s State Statistics Committee said.

The main reason of such a decline is the reduction by 27.6 percent in volume of goods production and services in the construction sector, according to the committee.

During the period, the volume of GDP in the country’s non-oil sector reached 39.4 billion manat and its share in the total volume of Azerbaijan’s GDP was 65.7 percent. The volume of value added production in the sphere of oil and gas output and processing was 34.3 percent of the GDP (20.58 billion manat).

During the period, 37.4 percent (22.43 billion manat) of Azerbaijan’s GDP accounted for the industrial sphere, 10 percent (5.58 billion manat) – for the construction sphere, 5.6 percent (3.4 billion manat) – for the agricultural sphere, forestry and fishery.

Net taxes on production and import accounted for 7.7 percent of Azerbaijan’s GDP.

According to the report, 10.2 percent of the GDP (6.15 billion manat) produced in the service sector accounted for the trade and repair of vehicles, 6.8 percent (4.1 billion manat) – transport and warehousing, 2.4 percent (1.44 billion manat) – tourist accommodation and catering sphere, 1.8 percent (1.06 billion manat) – information and communication services, 18.1 percent (10.84 billion manat) – other services.

The volume of value added production in Azerbaijan’s industrial sphere increased by 0.4 percent in 2016, as compared to 2015, trade and overhaul of vehicles – by 1.5 percent, tourist accommodation and catering – by 0.1 percent, in the sphere of information and communication services – by 4.5 percent, agricultural sphere, forestry and fishery – by 2.6 percent.

The telecommunication sector was the most dynamic sector in Azerbaijan in 2016.

According to the State Statistics Committee, as of 2016, value added worth 1,060.2 million manat was observed in the sector or by 4.5 percent more than the sectoral GDP. The telecommunication sector in the reporting period surpassed such sectors as hospitality and food, where GDP reached 1,436.3 million manat, increasing by 0.1 percent compared to 2015. In terms of growth, the ICT sector surpassed the retail trade (6,152.2 million manat with a 1.5 percent growth).

The industrial production decreased by 0.4 percent in the country in 2016.

According to the Azerbaijani State Statistics Committee, the nominal volume of industrial production totaled 32.3 billion manat in Azerbaijan in 2016.

Real growth in non-oil industry reached 5 percent, while decreased by 1.1 percent in the oil industry.

Azerbaijan’s metallurgical industry and enterprises on production of finished goods from metal produced goods worth 420.4 million manat in 2016, according to a report of the country’s State Statistics Committee.

The report says that the output volume of metallurgical industry increased by 0.3 percent and the production of finished goods rose by 24.9 percent in 2016.

Azerbaijan produced 709 trucks in 2016, which is 1.8 times more than in 2015, the Azerbaijani State Statistics Committee said in a report as of 2016.

According to the report, Azerbaijan manufactured 1,034 tractors in 2016, or 8.3 percent more than in 2015.

Azerbaijan manufactured 270 cars in 2016, which is 62.8 percent less than in 2015.

Production of municipal special-purpose vehicles increased by 2.3 times and stood at 1,557 vehicles in 2016 as compared to 2015.

The agricultural production volume in actual prices amounted to 5,632.1 million manat in Azerbaijan in 2016 or by 2.6 percent more compared to 2015.

In particular, the production volume in plant cultivation amounted to 2,576.9 million manat, while - 3,055.2 million manat in livestock.

According to the Azerbaijani State Statistics Committee’s report, the livestock production increased by 2.8 percent, crop production – 2.5 percent in the reporting period.

According to the State Statistics Committee, as of 2016, the Azerbaijani consumer market amounted to 39.2 billion manat, which is by 0.9 percent more than its turnover for 2015.

The monthly consumer expenses are estimated at 339.1 manat per capita in 2016 or by 39.2 manat more compared to 2015.

According to the State Statistics Committee, the prices on consumer goods and tariffs for services increased by 12.4 percent in 2016 compared to 2015.

The food prices increased by 14.7 percent, non-food items – 16.7 percent and paid services – 5.8 percent in 2016.

Such a high rate of inflation in the country was the result of the impact of national currency devaluation.

The foreign trade turnover with 186 world countries amounted to $17.68 billion in 2016, or by 19.46 percent less than in 2015 compared to 165 countries in 2015.

The volume of exports decreased by 28.17 percent and amounted to $9.14 billion compared to 2015. The volume of import decreased by 7.42 percent and reached almost $8.53 billion.

2016 ended with a black ink of $610.83 million, while a trade surplus of $2.2 billion was recorded as of 2015.

According to the Azerbaijani State Statistics Committee, around 14,903.4 million manat was invested from all financial sources in the development of the economic and social areas of Azerbaijan in 2016 or by 26.1 percent less than in 2015.

According to the Azerbaijani State Statistics Committee, the nominal income of the population totaled 45.39 billion manat in 2016, which is by 8.7 percent more compared to 2015.

Thus, during the reporting period, the nominal income of the population per capita increased by 7.5 percent and reached 4709,8 manat (392.5 manat for the month).

As of January 1, 2017, some 33,000 people were officially registered as unemployed in Azerbaijan, including 38.1 percent women, the Azerbaijani State Statistics Committee’s report said.

According to the report, the number of unemployed increased by 14.2 percent in the country in 2016 compared to 2015.

As of 2016, the economically active population reached 5.01 million people.

In December 2016, the average rate of manat to the U.S. dollar was 1.75 manat versus dollar (1.60 manat as of early 2016), to euro – 1.84 manat versus euro (1.77 manat), to Russian rouble – 2.82 manat versus 100 rouble (2.39 manat).