Azerbaijan, Baku, 4 April / Trend / In Azerbaijan at 25.4% in 2007, GDP growth was underpinned by surging crude oil production and exports, the Asian Development Bank's 2007report placed on organization's official website says.
This performance was due to increased production at the Azeri-Chiraq-Guneshi offshore oil field operated by the Azerbaijan International Operating Company, the largest exporter and accounting for over 90% of the total crude oil exports. Oil from that field is exported to Western markets through the Baku-Tbilisi-Ceyhan pipeline. Oil production is expected to reach 1 million barrels a day this year.
The report says that services and construction also expanded rapidly. Growth in services at 25.1% was bolstered by the expansion of communications and transport.
Foreign direct investment, particularly by international oil and gas companies, has been the main driver of heady investment in the past decade. However, it declined by 28.9% or about $1.3 billion in 2007, with the completion of several significant oil and gas exploration projects
"A further decline in foreign direct investment is expected over the next 5 years," the report says.
In 2007, domestic investment (mainly public) balanced the decline in foreign investment, to account for over 53% of the total.
ADB positively assesses the simplified business registration procedures in the Country. Another significant change was a decline in the average cost and time for opening a new business, from over 50 days in 2006 to less than 30 in 2007.
"Continued strong foreign currency inflows from oil and gas exports put additional pressure on inflation," the bank says. Despite sterilization efforts by the National Bank of Azerbaijan (NBA), money supply (M3) rose by about 71.6% in 2007 (Figure 3.2.3). The manat appreciated by about 5.0% against the dollar in nominal terms.
Due to higher inflation than in major trading partners, the real effective exchange rate has appreciated by over 20% since end-2004. The inflation rate doubled from an average of 8.0% in 2002-2006 to 16.7% in 2007. The biggest jump in consumer inflation was recorded in January 2007 when the Government raised public utility tariffs (water supply and sanitation, electricity, and gasoline).
The increases in global oil prices and in the export volume of hydrocarbons resulted in a current account surplus estimated at $8.0 billion, equivalent to 27% of GDP in 2007. According to preliminary data, the trade surplus rose by over 30%, driven by crude oil exports, which account for about 90% of the total. Gross international reserves, excluding gold, increased from $2.5 billion at end-2006 to
$4.3 billion at end-2007 (Figure 3.2.7).