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Russian Gazprombank predicts growing share of construction in Azerbaijan's GDP

Economy Materials 7 June 2022 10:35 (UTC +04:00)
Russian Gazprombank predicts growing share of construction in Azerbaijan's GDP
Sadraddin Aghjayev
Sadraddin Aghjayev
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BAKU, Azerbaijan, June 7. The share of construction in Azerbaijan's GDP will continue to grow along with development of infrastructure in the country’s Karabakh region and additional foreign and domestic investments, Deputy Head of the Russian Gazprombank's Market Analysis Department Gulnara Khaidarshina told Trend.

According to Khaidarshina, this will allow diversifying the economy through the non-oil and gas component, which can also be one of the potential factors for raising Azerbaijan's sovereign ratings to investment level.

"As we noted earlier, the implementation of new projects in Karabakh, according to our estimates, added 1.2 percentage points to GDP growth in 2021, at an early stage of their implementation. This and next years, when projects in the region speed up and attract not only budgetary, but also foreign investments, their contribution to economic growth can reach 2.5 percentage points. Moreover, construction will become the third most important component of GDP after mining and transport sectors," she said.

The bank representative also noted that due to high oil and gas prices, the budget surplus of Azerbaijan in the first four months of 2022 increased by 3.5 times compared to the same period of last year and reached 6.3 percent of GDP.

“Earlier we noted a more restrained growth in budget expenditures (+ 8.5 percent in annual terms) compared to revenues. Considering that the budget for 2022 was drawn up based on a conservative oil price forecast of $50 per barrel, with current oil prices over $100, the budget can be executed with a deficit of no more than 0.3 percent of GDP. Thus, additional spending without going beyond the previously approved deficit can amount to at least 3.2 percent of GDP," Khaidarshina said.

Given that the diversification of the economy is a sensitive parameter for Azerbaijan's sovereign ratings, additional fiscal stimulus in connection with new projects in Karabakh and the investment program is a supporting factor for Azerbaijani Eurobonds, she added.

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