General economic situation

Analysis Materials 11 August 2008 12:02 (UTC +04:00)

The Gross Domestic Product (GDP) of Azerbaijan increased by 16.5% and made up AZN 18.5bln in the first half year of 2008. The growth rate made up 18.6% less than the same period of 2007.

The drop in the rates of economic growth may be explained not only decrease of the growth rate in the industry, but also in the sphere of agriculture, cargo transportation and paid services. In January to June, the industrial production and services increased by 13.8% and made up AZN 15376.6mln. The growth in 2007 made up 35.6%.

Reduction in the growth rates in the industry in the first half-year of 2008 is explained firstly through the reduction of the production of nonmetallic mineral elements (decrease of 4.1%), machines and equipment (3.4%), transportation means (20.4%), production of the sewn (8.9%), pulp and paper production (19.3%).

The amount of the GDP per capita made up AZN 2168.7 ($2601), an increase of 15.2%.

The amount of the production in all spheres of the economy made up 74.8% of the GDP where 64.7% (AZN 11966.6mln) fell on industry. The specific weight of the service sector in the GDP made up 18.2%. Net taxes from the production and import made up 7% in the GDP.

Value Added Price In mln manats Special weight, in % Real rise, in %
GDP in total 18505,7 100,0 116,5
production of goods 13834,0 74,8 118,7
including - industry 11966,6 64,7  117,3
- agriculture 567,7 3,1 110,7
- construction 1299,7 7,0 133,0
Production of services 3369,2 18,2 110,5
Including: - transport 659,1 3,6 110,6
- communications 268,7 1,4 137,3
- trade and repair 1141,0 6,2 114,4
- hotels and restaurants 159,4 0,9 133,7
- social and different services 1141,0 6,1 101,0
Net taxes on products 1302,5 7,0 114,7
Defliator 131,9

Sources: State Statistics Committee

The dominant role of oil and gas production is continuing in the GDP because their production is increasing. The oil production made up 24,207,400 tons, an increase of 14.0% and gas production -11763.3mln cu.m under growth of 69.6%.

Over the reported period, the growth rates in the extractive industry were at the level of 14.5% composing AZN 12 140.46mln with the specific weight of 78.9% of entire industrial production. However, growth rates in the processing industry were 10% composing AZN 2 580.6mln (16.8%), power engineering, gas and water - AZN 655.52mln with the increase of 8.2%.

In not oil sector of industry, the volume of industrial production and services increased by 12.9%. In particular, during the reported period, in the metallurgical industry and ready products from the metal an increase of 35.8% was observed, wares made from tree and processing of wood - 6.6%, food products - 8.9%, chemical production - 45.8%, production of the skin and skin wares - 41.9%, etc.

Unlike previous months, growth was recorded in the public production sector which totaled 104.5% in January to June. The specific weight of the industrial production and services in the public sector made up 18.25% (AZN 2806.67mln) of all industrial production. Growth in private sector was 16.1%.

The chemical production increased by 45.8% as compared to the same period of 2007.

Growth rates in the agrarian production because of the collection of the high harvest of grain in June increased. In January-June the volume of production increased by 10.7% (for the comparison in January - June 2007 increase was 4.8%).

In addition, growth was observed in import and export operations. The growth of the Azerbaijani export equaled more than five times up to $17489.04mln and import - $3083.2mln (25.57%). Nearly 95.99 of the export operations fell on oil and oil products. During the reported period, nearly 20mln tons of oil were transported from Azerbaijan via pipeline and railway.

Growth rates of investments in the economy of the country also increased. Nearly AZN 3643.4mln was invested in the economy of Azerbaijan over the period of January and June 2008, an increase of 31.9% from the figures of the last year when the increase totaled 10.6%. Moreover, internal investments prevail above the external investments, their share in the total amount of investments are respectively 68.6% and 31.4%. The increase is explained through large-scale construction works in the transport sector, demand for investments in the construction of production facilities.

Consumer demand somewhat reduced growth rates. During January- June the volume of retail commodity turnover grew by 14.9%, paid services - 29.5%. For the comparison, in January - June 2007 the volume of retail commodity turnover grew by 14.4%, paid services - 32.5%.

In June the growth rates in the prices of the consumer goods and tariffs on the services made up 0.1% as compared to May 2008 and in January - June the growth rates in the inflation as compared to the same period of 2007 were 20.2%. Over the reported period, the prices for foodstuffs grew by 28% and non-foodstuffs by 10.6%, and prices of the services - 11.2%.

Prices of the food products fell in June by 0.5%, but nonfood products increased by 0.5%.

The State Committee fixed in January to June 2008 that prices of bakery rose 0.8%, tea and coffee - 2.4%, beer - 2.6%, alcohol drinks - 0.9%, oil and fats - 0.2%, dairy, cheese, and eggs 0.6%, meat products - 1.2%, tobacco - 2%, but prices decreased for fruits by 2.2%, vegetable - 7.4%, fish - 0.4%.

As a result of January to June 2008, the nominal incomes of population grew by 34.2% as compared to the same period of 2007 and made up AZN 9041.2mln. During this period, the nominal incomes per capita totaled AZN 1059.6, which is higher than the index of January June 2007 by 32.6%. The increase in the incomes of population was caused by rise in wages in different sectors of economy and increase in the social benefits as a whole in the country.

Basic tendency in the financial market during January-June remained strengthening the rate with respect to the USD. This year the Government of Azerbaijan expects 5% strengthening in the exchange rate of national currency with respect to the USD, up to AZN 0.81. These forecasts are laid in the macroeconomic forecasts for 2008.

In June the rate of manat in relevant to the USD composed 0.82 manat, Euro - 1.27 manat, Russian ruble - 3.45 manat for 100 rubles. In the first half-year these indices respectively composed 0.83, 1.28 and 3.48 manat.