ADB: Economic growth in Azerbaijan to accelerate (UPDATE)

Business Materials 3 April 2019 10:50 (UTC +04:00)
The Asian Development Bank (ADB) expects Azerbaijan’s economy to grow 2.5 percent in 2019

Details added (first version posted on 09:30)

Baku, Azerbaijan, April 3

By Azad Hasanli - Trend:

The Asian Development Bank (ADB) expects Azerbaijan’s economy to grow 2.5 percent in 2019, Trend reports with reference to the bank’s report April 3.

Azerbaijan’s economy will grow 2.7 percent in 2020, according to the report.

“GDP growth strengthened in 2018 as expansion in services and agriculture continued, and as industry contracted less,” reads the report. “Exchange rate stability tamed inflation, and higher oil prices widened the current account surplus.”

“On the supply side, industry is forecast to grow by 1 percent each year, driven by manufacturing and gains in mining from higher gas production,” the report noted. “Construction is expected to expand by 3 percent in 2019 to accommodate additional government programs for agriculture and housing and by 2 percent in 2020 with the implementation of regional development programs.”

“Agriculture is projected to expand by 3 percent in 2019 and by 4 percent in 2020 as farmers’ access to finance improves,” the ADB said. “Growth in services is projected at 3 percent in both 2019 and 2020 on gains in transportation, tourism, and retail trade.”

On the demand side, a higher government salary bill will boost public consumption, while higher effective household income from growth should fuel private consumption, especially as inflation stays fairly moderate, according to the report.

“A stable exchange rate and the implementation of economic reform to improve the business climate are projected to boost private investment, and more expansionary fiscal policy will raise public investment”, the report said.

Inflation is projected to accelerate to 4 percent in 2019 in line with higher salaries and, as faster growth boosts domestic demand, reach 5 percent in 2020, according to the report.

“A relatively stable exchange rate should prevent high inflation,” said the report. “Over the next 2 years, the central bank is expected to focus on two objectives: maintaining exchange rate stability and limiting inflation to 5 percent. The authorities will therefore closely monitor import demand, foreign exchange movements, and capital flows. A stable exchange rate is expected to boost lending to the private sector. If the inflation target is attained, the central bank can be expected to ease the policy interest rate further.”