Author: Nurlana GULIYEVA
According to President Ilham Aliyev, 2017 was a “Year of Deep Economic Reforms”. Nevertheless, the leadership of the country has set new tasks for the government to stabilize the national economy and diversify state revenues. The gradual withdrawal from the dominating oil factor should ultimately protect the economy from price fluctuations in external markets and save the funds accumulated from the sales of energy resources for future generations. Last year, the non-oil and industrial sectors of the economy grew by 2.5% and 3.6%, respectively.
Less debt, more investment
Azerbaijan successfully maintains economic stability through economic reforms, which is also confirmed by influential international financial institutions. According to the estimates of the Davos World Economic Forum, the economy of Azerbaijan advanced two steps in terms of competitiveness in 2017 and is ranked the 35th on a global scale, which is a fairly high result.
However, the impact of oil price fluctuations on the Azerbaijani economy, as well as the decline in direct revenues of the state budget forced the government to expand the transfers from the State Oil Fund (SOFAZ). This had a negative effect on the volume of savings in the fund. Although the existing situation is not critical, one of the main goals for 2018 set by President Ilham Aliyev at the enlarged meeting of the Cabinet of Ministers is to increase the revenues of SOFAZ. A parallel goal is to reduce the external public debt.
Earlier, the Finance Minister Samir Sharifov said that in 2018 Azerbaijan would increase the budget expenditures for servicing the external debt by 37.8% (₼2.6b). This increase is due to the payment of debts of the International Bank of Azerbaijan.
“We are not dependent on any financial institution. We get loans. However, I should note that we must conduct an even more serious policy considering the loans,” said President Aliyev. He added that although the level of Azerbaijan's external debt is one of the lowest in the world, it must be reduced further.
This can be achieved through withholding lending external funds to not very important projects. “We must use external funds for technologically important projects. Borrowing external loans for the construction of buildings or other projects that we can implement on our own is a wrong approach,” said Aliyev.
As a result, this affects the amount of foreign exchange reserves of Azerbaijan, which is the basis of economic stability and guarantees. By the end of 2017, these reserves reached $42b, which puts Azerbaijan to one of the leading places on the world scale in terms of foreign exchange reserves per capita.
“Economic and political stability, foreign exchange reserves, and commercial attractiveness of important projects implemented in Azerbaijan will help us in attracting foreign investments,” said Aliyev. In 2017, Azerbaijan recorded an inflow of $14.6b into the national economy. Hence, Azerbaijan continues to maintain the image of a stable state that guarantees the protection of investor capital. According to forecasts, this indicator may be rounded up to $15b in 2018.
According to President Aliyev, Azerbaijan will also ensure macroeconomic stability in 2018. “We have managed to stabilize the macroeconomic situation, slow down the inflation, keep the manat stable by the end of 2017. I am confident that these trends will intensify in 2018,” stated the president.
State support will continue
The above is the global forecasts for 2018. In fact, the government targets to strengthen mainly the export-oriented production spheres in order to improve the indicators of the past year. According to Minister Samir Sharifov, during the eleven months of 2017, the foreign trade turnover of Azerbaijan reached $21.8b (increased by 12%, as compared to the corresponding period of the previous year). Exports for the same period have reached over $14b (increased by 19%), while the import volume grew by only 1%, which is due to the fact that Azerbaijan provides an even greater volume of domestic demand through local production.
So, in an attempt to expand the export potential of the country, the government is focused on the development of industrial parks and quarters, as well as the launch of new production lines. It is planned to open ten carpet factories this year, which will increase their total number by half. In addition, due to the development of agriculture, Azerbaijan can improve its position on the food security index of the Davos World Economic Forum (57th in 2017). “We will take additional measures to improve the food security, in particular grain growing, so that this year, as in the past, we can reduce dependence on imports and increase the volume of export products,” said Aliyev. Last year, the agriculture sector grew by 4.1%. According to the president, the meetings held last year in the regions specialized in the production of cotton, silkworm, hazelnut, tobacco, tea, rice, citrus products, as well as the adoption of several state programs ensured the development of these industries.
State support to private sector will continue this year as well. In 2018, the National Fund for Entrepreneurship Support (NFES) will transfer ₼170m of loans to non-oil business projects. These funds will be allocated not from the state budget, but from the fund itself, which has collected the granted loans in due time. “This demonstrates that the entrepreneurs, who had borrowed from the state, realize their responsibility and return loans. On the other hand, this indicates that the funds transferred from the state budget to the NFES earlier work. If there are more projects, then, in principle, we can increase this amount,” said Aliyev.
So, all conditions for accelerating the pace of economic growth exist in Azerbaijan. Influential international financial institutions also confirm this fact. According to the Global Economic Prospects report published on the World Bank's website in January, Azerbaijan's GDP growth in 2018-2020 will be 0.9%, 1.5%, and 2.6%, respectively. The government's forecasts are even more optimistic: 1.5%, 4%, and 3.7%.
Moreover, as pointed out by President Aliyev, the set tasks are a minimum program with all technical and financial means available. The implementation of new reforms and initiatives can further improve the statistics of this year.