Azerbaijan: Transformation task ahead

Azerbaijan: Transformation task ahead

Baku, Azerbaijan, Sept. 20


Azerbaijan, having emerged from an economic crisis that began just a few years earlier, now faces another formidable challenge: how to transform its economy into one where growth and job creation is driven by a dynamic private sector, reads the article byInternational Monetary Fund Mission Chief Natalia Tamirisa and the IMF Senior Economist Kevin Ross for Azerbaijan, Trend reports.

On Sept. 6, the IMF Executive Board announced the completion of 2019 Article IV consultations with Azerbaijan.

As discussed in a recent report, in 2014-15, a slide in oil prices, along with a banking crisis and a regional downturn, shrank Azerbaijan’s budget revenues and triggered a prolonged economic slowdown. Meanwhile, the country’s non-oil sector, which had been expanding at a fast clip in 2011-14, came to a standstill.

To halt the slide, the authorities tightened the public purse, adjusted the exchange rate, closed many unviable banks, and took steps to improve the business environment. Thanks to this robust response and firming oil prices, the country has started to turn the corner.

So, what lies ahead for Azerbaijan’s economy?

First, the good news: fiscal and external surpluses have risen, inflation has declined, and the banking sector, while still fragile, has stabilized. With the hydrocarbon sector revitalized by new gas exports, the economy expanded at a 2.5 percent clip through the first half of 2019. A recently announced bad loan resolution program and increases in wages and pensions have boosted consumer demand.

However, with oil production now in a long-term decline, the country needs to ween itself off its dependence on hydrocarbons. This requires diversifying sources of economic growth and government revenues, creating a viable and competitive private sector, and improving resilience to shocks. Without such a transformation, the economy will not be able to achieve sustainable growth and create the jobs needed for Azerbaijan’s young population.

Economic policies should play an important role in creating incentives for this transformation.

A key building block is fiscal policy. Weening the budget off oil requires saving exhaustible hydrocarbon wealth for future Azerbaijani generations. But fiscal consolidation needs to be growth-friendly. To this end, the efficiency of public spending needs to be improved, transfers and subsidies should be better targeted to those who need them most, and state-owned enterprises need to be restructured to become self-sustainable. Improving the efficiency of tax policy and administration should also remain a priority. A well-designed fiscal rule, along with stronger public financial management and greater fiscal transparency, can help guide fiscal policy and promote discipline.

A second crucial plank is the central bank’s planned transition to inflation targeting. Greater exchange rate flexibility under such a regime would help the economy to absorb external shocks without losing competitiveness. It would also encourage better management of exchange rate risks and help prevent a build-up of future vulnerabilities. Together with greater exchange rate flexibility, increased issuance of government securities in domestic markets would foster financial market development by providing a benchmark for corporate bonds and an investment asset for the private sector.

The third building block is a well-functioning financial system, which can direct savings to their most efficient uses. Further upgrading of financial sector supervision and phasing out of regulatory forbearance, along with an independent asset quality review, are essential to improve confidence and prevent a build-up of future vulnerabilities.

Finally, for a private sector-led growth model to take hold, the government needs to step back and focus on creating an enabling environment for the private sector to flourish.

Azerbaijan has already started to put the pieces of this new policy framework together. Recent announcements of reforms are positive steps. Effective implementation of these measures is now essential to ensure that the underlying goal of improving Azerbaijan’s economic prospects and inclusiveness is realized.

Russia allows supply of peppers, tomatoes from some Uzbek enterprises
Russia allows supply of peppers, tomatoes from some Uzbek enterprises
Uzbekistan, Germany discuss issues of co-op on transport sector
Uzbekistan, Germany discuss issues of co-op on transport sector
Kazakhstan's agriculture output surges over 1Q2021
Kazakhstan's agriculture output surges over 1Q2021
Loading Bars
Azerbaijan needs to ensure efficient online opening of bank accounts - ABA head
Russia allows supply of peppers, tomatoes from some Uzbek enterprises
Azerbaijani, Belarus presidents hold one-on-one meeting (PHOTO)
Uzbekistan, Germany discuss issues of co-op on transport sector
Sales of Iranian mining companies grow
GiLTEX welcomes customers in new Sumgayit shop (PHOTO)
Hungarian companies may take part in business forum on restoration of Azerbaijan's liberated lands
Kazakhstan's agriculture output surges over 1Q2021
Azerbaijani Central Bank to facilitate growth of countrywide mobile banking
Half of allocated for cotton land sown in Turkmenistan’s Mary region
Iran to create infrastructures in industrial parks of Qazvin Province
Azerbaijani insurance, financial companies eye to be integrated with ASAN Login
Uzbekistan, Saudi Arabia to expand co-op in tourism sector
Georgia preparing to place Eurobonds on London Stock Exchange
Georgia holds auction of thermal water company's privatization
Shares of Turkmenistan’s Senagat Joint-Stock Commercial Bank to be put on sale
Iranian energy minister talks about water, electricity facilities to be launched
Gold, silver prices rebound in Azerbaijan
Azerbaijan developing mobile platform for money transfers
Azerbaijani SOCAR names amount of recently realized investment projects
IMF expects Azerbaijan’s gas output to rise in 2021
Azerbaijan eyes expanding multimodal cargo transportation with Ukraine
UAE partners with Japan's iSpace to send rover to the moon in 2022
Activities of Iran’s Jask port expand
Iran boosts exports of agricultural products
Georgia aims to ensure sustainable development of wine industry
Turkish Energy Ministry prolongs TPAO's license for oil, gas exploration
Azerbaijani oil prices on the rise
Value of Azerbaijan's 1Q2021 imports of Turkish chemical products disclosed
Kazakhstan's revenues from transportation via pipelines down
Kazakh gas supply company to buy pipes via tender
Kazakhstan’s national postal service operator to buy construction materials via tender
Iran’s South Pars Gas Company reveals its production data
Azerbaijani MPs to leave for Russia
Kazakhstan’s Air Astana launching flights to Georgian Batumi
Iran discloses data of iron, non-alloy steel exports
Turkmenistan, Qatar interested in developing trade, economic ties
BP to conduct planned maintenance at Azeri-Chirag-Gunashli
IAI teams with Thales on missiles for British frigates
Azerbaijani currency rates for Apr.14
Foreign investments increase in Iran's industry, mine and trade sector
Indonesian e-commerce firm Bukalapak raises $234 million
Military Trophy Park in Baku to expose Armenia's unprecedented crimes - expert
Freight train derails in Turkey
Gasoline prices to rise amid expected growth in fuel demand
Hydrocarbons to supply half of world’s energy needs by 2050
Belarus expresses readiness to support Azerbaijan in restoration of liberated Karabakh (PHOTO)
Iranian currency rates for April 14
All sanctions against Iran should be lifted unconditionally, Russia says
Turkmenistan losing popularity among Turkish job seekers
India's new coronavirus infections hit record of 184,372
Azerbaijan's Xalq Sigorta insurance company talks 2020 net profits
Oil maintains upward momentum but virus concerns cap gains
Britain to withdraw nearly all its troops from Afghanistan
Turkey's COVID-19 cases hit new peak at 59,000
Tehran to resume flights to London next month: Official
Cargo transportation via railways up in Kazakhstan
France to allow Georgian citizens find legal employment in country by end of 2021
Brazil reports 3,808 single-day deaths from COVID-19
Biden invited to address U.S. Congress on April 28
South Africa suspends J&J vaccine rollout
Azerbaijan to become regional hub for Industry 4.0 development - US IDC
U.S. administers 192.3 million doses of COVID-19 vaccines: CDC
France suspends all flights with Brazil due to virus variant
UK records another 2,472 coronavirus cases, 23 deaths
Boeing reports first quarter deliveries
Biden set to withdraw U.S. troops from Afghanistan by Sept. 11
Number of COVID-2019 cases across globe up by over 567,000 in past day — WHO
Iranian nuclear deal meeting in Vienna rescheduled to April 15
Kazakhstan expects positive dynamics in oil industry
Erdogan reveals stricter COVID-19 measures in Turkey during Ramadan
Iran's annual iron ore concentrate output nears 50mn tons
Deputy Finance Minister: Georgia ranks first in Europe with economic growth rate according to IMF
Southern Gas Corridor increases liquidity in European gas markets
Uzbekistan-India trade grows to record high in 2020
Azerbaijan plans to organize personal account system for auditors
China's 2M2021 import of Azerbaijani products surges in value
Exchange of all data necessary to conduct effective demining is required - OSCE MG
Baku to host international gymnastics competitions again
German gov't approves uniform nationwide COVID-19 response measures
Russia's daily COVID-19 cases record lowest in months
Iran to start 60% enrichment tonight: Nuclear spokesman
Israel to allow vaccinated tourists in starting late May
Biden confirms invitation to Putin to take part in climate summit
Presidents of Azerbaijan, Belarus hold unofficial meeting
IMF unveils forecast on Azerbaijan's oil export for 2021-2022
Azerbaijani FM, Romanian ambassador stress high level of development of bilateral political relations (PHOTO)
Special equipment of Belarus assembled in Azerbaijan may be exported to Turkey
Azerbaijan's Foreign Ministry responds to Armenia's statement on War Trophy Park
President of Belarus pays working visit to Azerbaijan (PHOTO)
Moscow, Tehran attach great importance to North-South Corridor – Russian FM
Azerbaijani president gives weighty answer to Armenia’s disinformation campaign - Official (VIDEO)
Belarus reveals plans for oil purchases from Azerbaijan
Kazakhstan’s FlyArystan launching direct flights to Georgia
Iran's Energy Exchange announces products to be on sale on April 14
International Bank of Azerbaijan opens tender to buy printed materials
Azerbaijan's Aghdam needs to be fully rebuilt - German historian (VIDEO)
Azerbaijan's PM meets with BP's regional president
Ukraine may take part in restoration of Azerbaijan's liberated lands
Azerbaijani Finance Ministry places short-term bonds on auction
All news