Country Report Azerbaijan October 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 much weaker external economic environment, particularly the lower price of oil since end-2008.
• 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 around 5% in 2009. An improvement in external demand and a moderate increase in oil prices will see growth expand by a robust 6.5% and 7% in 2010 and 2011, respectively.
• 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 authorities to have to allow the manat to depreciate in nominal terms against the US dollar in late 2009 and early 2010, owing to lower 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 it is forecast to average more than 17% of GDP in 2010-11.

Monthly review

• During a visit to the capital, Baku, the acting president of the Congress of Local and Regional Authorities of the Council of Europe called on the Azerbaijani authorities to take measures to improve local democracy.
• The State Oil Company of the Azerbaijan Republic (SOCAR) has been approached by the Kazakh state-owned energy company, KazMunayGaz, to consider supplying natural gas to help to fill its pipeline to China.
• The Central Bank of the Azerbaijan Republic agreed a Manat750m (US$933m) loan with SOCAR in September, the first such agreement following legislative changes in July that substantially increased the bank's lending powers.
• The communications ministry confirmed that it would launch third-generation (3G) mobile telephone services by end-2009. In September the ministry outlined the criteria that 3G providers would need to meet.
• Real GDP expanded by 5% year on year in January-August, boosted by a 3.9% expansion in industrial production, providing a sign that the slowdown in economic activity could be drawing to a close.
• According to the latest central bank data, the current-account surplus rose sharply, to US$2.7bn, in the second quarter. The 46.5% quarter-on-quarter expansion in exports was the primary driver of the increase.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;48
NAICS Code: 22;517