Country Forecast Azerbaijan June 2018 Updater

Country Forecast Azerbaijan June 2018 Updater

  • June 2018 •
  • Report ID: 265351 •
  • Format: PDF


  • Ilham Aliyev, who was re-elected president on April 11th, will continue to dominate the political scene.
  • Serious ceasefire violations between Azerbaijani and Armenian forces in Nagorny Karabakh are likely in the 2018-22 forecast period; however, The Economist Intelligence Unit does 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 hydrocarbon exports will proceed slowly, owing to the poor business environment. The government has given little indication that it plans to undertake disruptive reform.
  • 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.
  • We expect 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. Private consumption will also pick up as income from oil exports recovers.
  • We estimate that the current account moved into a surplus of 4.1% of GDP in 2017, owing to higher export earnings from the hydrocarbons sector. The current account will remain in surplus in 2018-22, although the surplus as a share of GDP will decline over this period.
  • 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.






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