Baku, Azerbaijan, Nov.28
By Ilaha Mammadli - Trend:
Azerbaijan adopted the state budget for 2015, formed at an oil price of $90 per barrel. And it is despite the fact that on Nov.27, the member countries of the OPEC oil cartel refused to reduce the quota for oil production. Oil prices will continue to decline due to the decision of the cartel, according to the forecasts.
But the decision of Azerbaijan remained unchanged. However, given the previous experience of adjusting the budget on the results of the half year, the country has retained the right to maneuver.
Taking into account the dependence of the Azerbaijani economy on prices for energy resources, this issue is in the focus of the entire economic bloc, and there is no danger for the economy of the country even at an oil price of $60 per barrel, according to the calculations.
Given the fact that the OPEC decided to keep the production quota at 30 million barrels per day till the first half of 2015, the Azerbaijani government also decided not to hurry and monitor the further behavior of the market.
Along with this, the country's government has prepared various scenarios of the outlook of the state budget and socio-economic development based on oil prices in the range of $60 to $90 per barrel. This will allow Azerbaijan to respond in case of sudden changes in oil prices to avoid the risks of budget forecast default.
The oil prices have dropped by nearly $30 over the last five months. This has not happened since the crisis of 2008. During that period the price fall created significant difficulties for the OPEC members and other producing countries.
Again, the oil price rapidly reduced after the decision of the exporting countries.
"Brent" prices reduced by $5.17 Nov. 27 and by $ 0.47 on Nov. 28, reaching $72.11 per barrel.
This means that the price of oil has reduced by 15 percent since early November. It will finish the month by the greatest continual decline since November 2008.
This will remain an issue at least as long as the confrontation continues between the Saudi Arabia and the US shale industry. A similar situation was in 1986, when the Arabs struck a blow to the US oil industry, by dropping the oil price up to $ 10 due to the increased production.
The forecasts of the Azerbaijani government show that oil production volumes will fluctuate until 2018.
The oil production in Azerbaijan will stand at 40.77 million metric tons in 2016, 39.42 million metric tons - in 2017 and 40.32 million metric tons - in 2018.
The present global situation, whether it is "shale revolution" or Western sanctions against Russia, is creating more interest in the development of industries not related to the oil and gas sector in order to reduce the economy's dependence on the prices of energy resources, as well as the need to strengthen economic independence as a whole.
Given that for every $10 reduction in the prices, Azerbaijan's state budget revenues fall by about $250 million, the oil factor should decline both in the budget revenues and in the GDP.
Naturally, this should take place gradually.
It is expected that the next year the oil sector's share in general budget revenues will decline to 65.3 percent versus 66 percent expected in 2014.
In 2013, this figure was 73.1 percent.
The review of the structure of Azerbaijan's economy shows that the factors promoting economic growth have been changing in recent years. For instance, the share of the oil sector in the GDP is forecasted to be equal to 34.9 percent in 2015, compared to 40.4 percent in 2014. The GDP volume on the oil sector will decrease by 2.2 percent in 2014.
In total, the share of the non-oil sector in Azerbaijan's GDP will increase from 66 percent in 2015 to 71.3 percent in 2018.
The growth of the non-oil sector is forecasted to be equal to 8.2 percent in 2015 and 7 percent in each of the subsequent three years.
This means that the country's economic growth will be upheld by the non-oil sector which should ensure the production of competitive goods able to compete not only with the goods produced in the WTO countries, but also in the EU.
Edited by CN
Ilaha Mammadli is Trend's deputy editor-in-chief for economic issues