Country Forecast Azerbaijan July 2018 Updater

Country Forecast Azerbaijan July 2018 Updater

  • July 2018 •
  • Report ID: 2556637 •
  • Format: PDF


  • The Economist Intelligence Unit expects real GDP to grow by 1.6% this year, on the back of higher oil prices, following growth of 0.1% in 2017 and a 3.1% contraction in 2016. In 2019-22 real GDP will grow by an average of 2.4%.
  • Serious ceasefire violations between Azerbaijani and Armenian forces in Nagorny Karabakh are likely in the 2018-22 forecast period. However, we do not expect a return to all-out war. Despite intermittent talks between the foreign ministers and presidents of the two countries, it is unlikely that a resolution will be reached in the forecast period.
  • Relations with Turkey will remain strong. Azerbaijan will aim to maintain cordial relations with Russia, which will continue to play a pivotal role in regional security.
  • Diversification of the economy away from hydrocarbons exports will proceed slowly, owing to the poor business environment. The government has given little indication that it plans to undertake disruptive reform.
  • The medium-term potential growth outlook is low compared with the average of the past ten years. Structural factors, such as weak competition, corruption and a lack of financing, will hold back investment. Strong vested interests are likely to resist efforts to increase competition and break up monopolies.
  • Gas exports will rise over the forecast period as the Shah Deniz II gasfield starts production. The hydrocarbons sector will continue to drive exports.
  • The operating environment for non-oil companies will be difficult, owing to pervasive corruption and the presence of large formal and informal monopolies. Diversification will become an increasingly pressing policy priority.
  • The Central Bank of Azerbaijan will continue to keep the exchange rate stable in 2018, around the current level of Manat1.7:US$1.
  • The current account will remain in surplus in 2018-22, averaging 5% of GDP, although the surplus will decline over this period as import growth outpaces that of exports.


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