Major events in Azerbaijan’s economic life in 2013

Baku, Azerbaijan, Jan.7

By Emin Aliyev - Trend:

Macro and micro-economic figures of Azerbaijan in 2013 reflect the continuing development of the national economy and at the same time shows major changes in its structure.

According to Azerbaijani State Statistics Committee, the country's GDP increased by 5.7 percent in Jan.-Nov. 2013 compared to the same period of 2012 and amounted to 52.1 billion manat. The GDP per capita showed a slightly less growth rate (4.3 percent) and hit 5604.2 manat ($7,142.8).

According to a report of the Azerbaijani Central Bank on monetary policy for three quarters of 2013, the country's strategic currency reserves increased by seven percent and amounted to $49.4 billion.

Additionally, the inflation level remained at a single level. According to the State Statistics Committee, the growth rates of consumer prices amounted to 2.3 percent at annual calculation. It should be noted that the inflation in Azerbaijan is at the lowest level when compared to all foreign trade partners of the country, according to the State Statistics Committee. Azerbaijan has about 148 trade partners.

The Central Bank of Azerbaijan continued to take measures in 2013 for protection of stability of national currency. The CBA carried out sterilization of currency in the amount of $1.7 billion in 2013 in order to prevent the sharp appreciation of the manat. As a result, in the first three quarters of 2013, the exchange rate of manat compared to dollar hasn't changed and appreciated at 0.06 percent. The manat has appreciated both nominally and actually compared to the currencies of Great Britain, Turkey, Russia, Ukraine, Georgia, Iran and Japan.

Diversification of economy

The Azerbaijani government continues to make efforts aimed at diversification of the country's economy in the direction of increasing the share of non-oil sector in its GDP structure. Azerbaijan's non-oil economy increased by 9.5 percent in Jan.-Nov. 2013 compared to the same period of 2012 and its share in the total volume of GDP hit 56 percent.

The country's economic successes are also reflected in the improvement of Azerbaijan's position in the largest world ratings. In the competitiveness ranking of global economies for 2013-2014 published by the World Economic Forum, the country rose from 46th to 39th place of 148 possible ones. Azerbaijan occupies the leading position among CIS countries five years running and outruns the countries such as Kazakhstan (50th place), Russia (64th), Georgia (72nd), Armenia (79th) and Ukraine (84th). In addition, World Bank and International Finance Corporation published "Doing Business-2014" report in October 2013, in which they included Azerbaijan in the top ten countries in the category 'starting a business' stressing that the measures to increase the use of electronic business registration is one of the world's best practices. In the final ranking the country rose by one place and ranked 70th among 119 countries.

Moreover, the country received a new source of income - revenues from using the first Azerbaijani telecommunications satellite Azerspace- 1 in 2013 to support the development of the non-oil sector of the economy.

A significant structural change in the Azerbaijani government was another important event of the year. The Ministry of Economy and Industry was established upon President Aliyev's decree as of October 22, 2013 to improve the state governance structure based on the Azerbaijani Ministry of Economic Development. Earlier, the Azerbaijani Ministry of Energy and Industry was charged with the industrial sector and, consequently, solving the tasks associated with its development. According to another presidential decree, it was reformed into the Energy Ministry. The consolidation of the industrial sector means the centralization of tasks related to the development of Azerbaijan's non-oil economy. This consolidation will make a significant contribution in supporting the industrialization policy and further strengthening of the pace of development of this sector, as well as accelerating the economic diversification, which is a priority for the country's development.

"Azerbaijan 2020: vision for the future" development concept

President Aliyev approved the "Azerbaijan 2020: vision into the future" development concept by his decree as of December 29, 2012. It covers the main strategic objectives of the development policy in all areas of the country. Its implementation is envisaged by approving the state target programs. The powers for the entire management and monitoring of the concept implementation were transferred to the Azerbaijani Presidential Administration.

Approving this document and its use unified the different state bodies' activity. The objectives indicated in the concept were reflected in the strategies of international financial institutions' activity on Azerbaijan for future years.

Compensation of deposits

The expansion of the country's financial opportunities also created conditions for solving such an important issue as deposit indexing remained in the Azerbaijani branch of the Savings Bank of the former USSR.

Thus, a lump sum compensation was paid to depositors in the middle of this year.

As of July 1, some 1,619,938 depositors (or their heirs) received compensation to the amount of 597 million manat. In Azerbaijan some $190 was paid per thousand Soviet rubles, while in other countries of the former Soviet Union, this figure was several times less - from $7 to $150.

Moreover, the population's deposits in the bankrupt bank were returned for the first time in the history of the country's banking sector.

Azerbaijan Deposit Insurance Fund (ADIF) completed the payment of compensation to RoyalBank depositors in July 2013. RoyalBank's license was revoked in July 2012. According to the court decision, the bank was declared bankrupt. As a result, ADIF paid 88.8 percent from a reimbursable amount, namely 13 million manat.

These two decisions have contributed to strengthening confidence in the country's banking sector.

Social sector

An automated system of pension assignment was launched in July, 2013 as part of the State Program on development of insurance-pension system in Azerbaijan Republic in 2009-2015.

The system helped to reduce the process to only one call to a special line of the State Social Protection Fund (SSPF). After the call the operator enters all the necessary data and informs the citizen about the date and location of the bank's branch, where he can pick up his plastic pension card. Currently only retirement pensions are assigned in an automated mode in Azerbaijan. In the future the system will cover other categories of pensioners.

ASAN Service Center No.1 of the State Agency for Services to Citizens and Social Innovation under the Azerbaijani President began operating in Baku in mid-February to facilitate the public access to state services.

Currently, there are five service centers in the country (three of them are in Baku, two more - in Sumgait and Ganja).

They were created in order to accelerate the reformation of state bodies and improvement of efficiency, transparency and accountability of government institutions, and reduce corruption. Furthermore, the ASAN service using special buses provides field services for citizens. It is expected that in 2014, the activity of the service will cover the whole territory of Azerbaijan.

Changes in tariffs

Processes developing in the economy also affected tariffs and prices for goods and services. In particular, the retail prices of petrol, diesel and wholesale prices of some petroleum products increased on December 3, 2013 in line with the decision of the Tariff (price) Council of Azerbaijan.

Aside from that, by the council's decision the tariff for sale of natural gas to enterprises producing electric power, aluminium, chemicals and steel works enterprises, has also increased.

The country's government said the increase in tariffs for producers will not affect consumers and the Tariff Council did not receive any appeals on revision of prices on passenger transportations and electricity provision for the population.

Excise duties on certain types of oil products were also increased and the main part of additional funds, which will emerge after the increase of tariffs, will come into the state budget as taxes.

However, tariffs for a number of communication services in the country were decreased and payments needed for re-registering telephone numbers another person's name and issuing listing of local and international calls were cancelled. The monthly fee for technical maintenance of numbers was also cancelled.

This decision will come into force next year. Azerbaijani Communications and Information Technologies Ministry's proposal on a simultaneous increase of the subscription fee and introduction of limits on calls, as well as using additional tariff on exceeding this limit were considered unreasonable.

Conclusion

In addition to the above, one of the most important events in the economic life of not only Azerbaijan, but also the entire region in 2013 was signing of a final investment decision on the second phase of development of the largest offshore Shah Deniz gas field held in Baku in December. This major agreement plays a key role in ensuring energy security of the European partners of the country. At the same time Azerbaijan has not only confirmed the status of a serious player in the market and its reliability as an energy supplier, but also marked a new stage in the development of the national economy over the next decade, which will be characterized by the growth of the role of gas exports and preservation of stable and major source of government revenue, which will enable further funding of strategic infrastructure and major social projects, strengthen security and defense capability of the country, take consistent measures to improve the welfare of the population.

The most important event that influenced the country's economy in 2013 was completion of two large-scale state programs - the "State program on socio-economic development of Baku and its settlements in 2011-2013", and the "State Program on socio-economic development of the regions of the Republic of Azerbaijan in 2009-2013." Their implementation significantly contributed to ensuring and supporting development of major infrastructure, strengthening food security and improving the living conditions of the Azerbaijani population.

At the same time, the Ministry of Economy and Industry of the country is finalizing the next phase of planning the development of the national economy - the third State program on development of Baku and its settlements, as well as the third State program on socio-economic development of the regions. These documents outline the priorities and put key objectives in the medium term, which include the continued maintenance of macroeconomic stability, improving the competitiveness of the national economy, accelerating the country's effective integration into the global economy, improving the business and investment climate, intensifying economic diversification, ensuring sustainable and balanced development of the regions of the country and development of human capital through sustainable social policy.

Translated by L.Z., N.H., E.A., M.L.

Edited by C.N.

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