Azerbaijan, Baku, Dec. 30/ Trend , N. Ismayilova/ The economic outlook remains relatively benign, but highly sensitive to the unstable external environment and the performance of the oil sector, according to the report of the IMF mission who visited Azerbaijan from Dec. 10 to 17.
The global slowdown has provided Azerbaijan with the immediate benefit of reversing the high inflation trend that has afflicted the economy since late 2005, the report said.
A sharp decline in international food and commodity prices reduced year-on-year inflation to 19 percent at end-November and end-2008 inflation is now projected at 17 percent, according to report.
"A further slowdown in oil growth to 6 percent at year-end and the fall of oil prices entail a slower accumulation of foreign assets during the last quarter of 2008. Still, the end-2008 external position will be stronger than envisaged under the supplementary 2008 budget."
"Non-oil GDP growth will also decelerate to 13 percent in response to global developments. The 2009 outlook is quite uncertain. Assuming some persistence of the offshore technical problems up to March-with oil and gas production plans otherwise fully implemented-oil sector growth should rise to 18 percent."
"If the moderate fiscal expansion of the 2009 budget is fully implemented, while banks pace down their credit activity to strengthen their balance sheet, non-oil growth would decelerate to 6 percent."
"Inflation is projected to decline to 9 percent by end 2009, reflecting falling international food and commodity prices and cooling domestic demand. The external position would remain strong and the accumulation of strategic foreign assets should continue, albeit at a slower pace. The outlook is subject to downside risks, mainly related to a further decline in oil prices and technical impediments to the realization of the 2009 oil extraction plans. Unfavorable economic developments in the region could also negatively affect non-oil sector activity," the report said.
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