Baku, Azerbaijan, June 2
Trend:
As a result of decline in oil prices, and slowdown and currency depreciations in trading partners' economies, economic growth of Azerbaijan fell to 1.1 percent in 2015, said in International Monetary Fund (IMF) report.
Growth in 2016 is projected to turn negative (-2.4 percent) before it starts picking up in 2017.
"Growth is expected to rise to about 2.5 to 2.75 percent over the medium-term as gas production and exports rise and reforms start to take effect. Full implementation of a strong structural reform agenda could increase the economy's growth potential to around 4 to 5 percent", said in report.
"The authorities have taken a number of steps in response to the weak external environment. The Central Bank of Azerbaijan (CBA) moved to a managed float exchange rate regime and appropriately raised interest rates in 2016 to address rising inflation", said in report.
Moreover, policy coordination among ministries is being enhanced with the creation of an informal macroeconomic committee within the government.
"The authorities reiterated the importance of maintaining a stable macroeconomic environment. The authorities concur with the need to return to a fiscal consolidation path in 2017 based on reducing inefficient public spending and increasing non-oil tax revenues. Other policy priorities include formulating and pre-announcing a multi-year fiscal consolidation plan, implementing a rule-based fiscal framework, and strengthening the monetary and exchange rate policy frameworks to allow greater exchange rate flexibility", said in report.