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Country Risk Service Azerbaijan August 2012 Updater

  • Publication Date:August 2012
  • Publisher:EIU
  • Product Type: Report
  • Pages:20

Country Risk Service Azerbaijan August 2012 Updater

Overview

The second term in office of the president, Ilham Aliyev, will be more testing than the first. Small protests against the government have been held on an ad hoc basis since the start of 2011 by religious and political groups. The risk of social unrest in 2012-16 could rise, as slower economic growth may lead to an increase in popular dissatisfaction with government policies. Despite higher global oil prices than in 2009, only modest increases in oil production resulted in a sharp slowdown in GDP growth in 2010, and a fall in oil output in 2011 led to growth flatlining in that year. Growth is forecast to average 2.9% per year in 2012-16. Annual average inflation will remain in single digits over the forecast period. Large inflows of oil-related foreign exchange and the presence of monopolies in several sectors will prevent more rapid disinflation. The manat will remain essentially stable against the US dollar over the forecast period. The current account will stay in surplus in 2012-16, driven by the substantial trade surplus.

Key changes from last month

Political outlook

Following a skirmish on the Nagorny Karabakh border, the Organisation for Security and Co-operation in Europe (OSCE) urged both Azerbaijan and Armenia to refrain from using force in their long-running dispute. Tensions between the two countries will remain high in the coming months.

Economic policy outlook

On July 25th Azerbaijan confirmed that it does not intend to provide financial assistance for the construction of the Trans-Caspian pipeline, the first time that it has said it is not interested in providing funding for this. Nonetheless, funding for the project from the EU or Turkmenistan may be forthcoming, especially as the completion date of the Trans-Anatolian gas pipeline (TANAP) nears.

Economic forecast

Real GDP grew by 1.5% year on year in the first half of 2012. The main driver of the pick-up in overall growth was the non-hydrocarbons economy; by contrast, the energy sector continues to exert a significant drag on growth.

Please Note: Due to the Nature of This Report The Toc is Not Available

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