Country Report Azerbaijan November 2009

Outlook for 2010-11

• Having been re-elected in October 2008, the president, Ilham Aliyev, is likely to face a more testing second term in office, given the weaker economic environment than in recent years.
• There will be an intensification of competition between the EU and Russia for Azerbaijani energy resources.
• Real GDP growth is estimated to have slowed to 5.9% in 2009. An improvement in external demand and an increase in oil prices will see growth expand by a robust 6.7% in 2010 and 7% in 2011.
• Slower real GDP and money supply growth, along with falling commodity prices, contributed to disinflation in 2009. In 2010 and 2011 energy price increases and a rebound in demand will push consumer prices higher.
• The Economist Intelligence Unit expects the manat to remain stable in nominal terms against the dollar at Manat0.8:US$1 in 2010, before beginning to appreciate in 2011 owing to higher foreign-exchange inflows.
• The current-account surplus is estimated to have fallen to US$7.2bn in 2009, owing to the fall in oil prices. An increase in oil prices and higher external demand mean that the surplus will average around 18.5% of GDP in 2010-11.

Monthly review

• Azerbaijan agreed to export 500m cu metres of natural gas to Russia, starting from 2010. This was a warning to Turkey, which continues to seek improved ties with Armenia, that it was not Azerbaijan's only available export route.
• The head of the presidential administration, Ramiz Mehdiyev, criticised the quality of Azerbaijani radio and television channels. The move could mark the start of another clampdown on media freedom in the country.
• From October 9th, the IMF no longer has a permanent representative in Azerbaijan. An official from the Fund said that it saw little point in maintaining an office in a country in which the IMF had no credit lines.
• Construction of a €2bn tourist complex in the northern Gusar region is under way, and is due to be completed in 2011. The government will cover 25% of the costs, with private investors meeting the remaining 75%.
• The government has revised its real GDP growth estimate for 2009 to 12.9%, from its earlier 10% forecast. As real GDP expanded by 5.1% year on year in January-August, the government's forecast seems overoptimistic.
• The trade surplus totalled US$4.8bn in the first eight months of the year. This was driven by an increase in exports to US$8.6bn, from US$7.1bn in January-July.

This report covers the following industry codes:
SIC Code: 15;49
NAICS Code: 23;22