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Economic results of 2018 and 2019 expectations

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Gubad Ibadoghlu, Dr.

Senior Analyst

Economic Research Center

The departing year was notable for a series of economic developments. Let’s look at those worthy of attention.

It should be noted that forecasts of the Government of Azerbaijan about a 2% GDP growth in 2018 failed to come true. Under the latest data of the State Statistics Committee, the GDP grew by 1% over 11 months of the year, including non-oil GDP by 1.3%, while the figure for 2017 stood at 2.4%. In this context, two aspects of the GDP are worthy of attention:
1. This year’s economic growth is expected to be down from the forecast. Thus, GDP growth in Azerbaijan in 2018 was prognosticated by the World Bank and UN at 1.8%; by the International Monetary Fund-at 1.3%; and by Russian sources (Interfax, etc.)- at 2%.

2. Slowing of growth rates of non-oil GDP in 2018, as compared to its level in previous years is a testimony to the fact that problems in this area remain, while the state initiated various measures, including essential investments, etc., to maintain the paces of growth of non-oil GDP.
It was the slowing of non-oil GDP export growth rates that led to the reduction of this sector’s share in the export basket. Thus, according to the State Statistics Committee, in January-October this year as compared to the last the non-oil export rose in comparative prices by 1,7% and in actual prices by 10,9% against 22, 8% and 21, 1%

One of the main reasons of drop in paces of economic growth over the first 11 months of the year is the decrease in the volume of capital investments by 8,8% from a year earlier. It should be added that over the same period the oil production in the extracting sector rose by 0,2%; commodity gas by 4,9%, as well as crude oil prices rose at the world market which, in turn, played a great role in GDP growth.

Thus, essentially contributing to the achievement of positive results in the area proved to be new projects and prolongation of a contract on the development of ACG and “Shahdeniz-2” blocks.

Among successes of 2018 there was reduction in the inflation rates to 2, 3% and ensuring of manat rate stability against dollar. Given the above, assets of the banking sector increased in the departing year first ever since 2015.

At the same time, level of the banking credits and related deposits rose over the past 11 months from a year earlier. In the meanwhile, net banking revenues over January-October dropped by 2,5 times as compared to the first 10 months of the last year. For this reason the banks closed 50 branches in a bid to optimize expenditures.

The departing year was also notable for non-adoption of legal and regulating measures to solve the problem of problem credits. For this reason, as of November 1, 2018, the volume of outstand credits made up 1698, 6 mln manats, or 14% of total credit portfolio. Regretfully, despite proposals of experts to resolve the issue, none of them was backed by the government.

In 2018, discussions around the International Bank of Azerbaijan continued. No progress was attained on this track. Moreover, analysis of budget revenues for 2019 was indicative that the IBA would not be privatized in the year to come.

Among lost opportunities in 2018 there is Milli Majlis’ refusal of the Code of Competition and Cabinet of Ministers’ did not confirmed forms of “Income and property declaration.”

Thus, the departing year marked monopolism tendencies in economy, particularly, a dominating position of “Pasha holding” at the expense of weakening positions of other holdings. Measures to fight corruption failed to attain necessary results due to the refusal from the “Income and property declaration.”

The year 2018 saw the opening of the Complex of Baku International Marine Trade Port; Sumgayit plants on production of polypropylene and building ligature; a factory “Tabaretta” on tobacco production; Baku Non-ferrous and Foundry Company; Masally industrial complex. As a whole, the departing year was successful for the development of non-oil industry. The growth in the area made up 9, 1%. Also, volumes of plant cultivation rose by 6, %.

The year 2018 was also notable for progress in Trade and Wine Houses; “Azerbaijani Trade house” in Riga and Warsaw; “Azerbaijani Wine Houses” in the Chinese cities of Urumchi and Shanghai.

In 2018, the gas pipeline TANAP and oil refinery STAR (SOCAR Turkey Aegean Refinery) were put into operation.

Also, a “Convention on the Status of the Caspian Sea” was finally signed by Russia, Azerbaijan, Kazakhstan, Turkmenistan and Iran.

A high spot of the year was Exxon and Chevron companies’ intent to put up for sale their shares in the ACG deposit and leave Azerbaijan after 25-year long cooperation.

A celebrated case was Azerbaijan’s suspension in the Partnership “Open government” in the end of the year due to its inactive status therein, as well as application of sanctions against companies and banks involved in money laundering of Azerbaijani origin in Great Britain.

Among events to be expected in 2019 are intensification of inflation tendencies, rise in consumer prices, probability of fall in manat rate, growth of real wages of hired labor, amendments in economy and public finance management in terms of fall in oil prices.

Last Updated ( Saturday, 29 December 2018 09:17 )  

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