TO BE CONTINUED

The economic picture of the world is again being coloured in sombre tones - the planet's strongest country is on the threshold of a default and a budget collapse and is dragging the economies of other countries into the whirlpool of crisis. There is no doubt that the situation in the US also holds world markets and exchanges in its clutches and is having a negative impact on global financial processes and the adoption of private investment decisions. The world, for the umpteenth time in the last five years, is faced with the danger of a recession…

In this context details published the other day about the situation in the Azerbaijani economy appear particularly encouraging, with the country continuing to confidently maintain stable rates of growth in virtually all spheres. In other words, as in previous years, everything is in place for averting external negative influences on the economy, and the forecasts voiced during the presentation of the draft state budget for 2014 point to a continuation of the policy of strengthening the components of the non-oil sector in order to maintain a balance in the event of fluctuations on world markets.

Dynamically and predictably

As Azerbaijani President Ilham Aliyev stated at a session of the Cabinet of Ministers concerning the results of socio-economic development in the first nine months of 2013 and forthcoming tasks, the growth in the country's economy in that period was 5.4%. "I believe that at the present time, especially at a time of a continuing crisis in the world, this is a sufficiently high figure which enables us to carry out our investment programmes successfully," the head of state added, stressing that, at the same time, the non-oil sector had grown by 10.4%, which is the highest figure worldwide.

Generally speaking, it is the stability of the macroeconomic situation which helps place Azerbaijan in the top ten in the world in this category. The chances are that this is the factor that determines the high level of investments in the country's economy, which in the first three quarters has reached 17.7bn dollars, of which 10.5bn dollars are internal investments, and 7.2bn dollars foreign investments. If such high rates of growth are maintained by the end of the year the end result could be a record 25bn dollars.

A positive dynamic is also being maintained in currency reserves, which currently amount to 49.4bn dollars - quite a high figure for a country with a population of 9.4 million. "I believe that in terms of per capita currency reserves Azerbaijan is a leader on a world scale. At the same time, we need to use these funds economically and draw up a budget in such a way that currency reserves in Azerbaijan are constantly increasing. For us this is a question of economic and political security, and at the same time we must build and leave for future generations an economy that is strong enough to prevent any problems linked with Azerbaijan's future development," Aliyev noted. 

It is also precisely this premise which is the defining one in choosing a conservative policy of managing foreign debt - the recent events in the US have once again proved the accuracy of this. Thus, the country's state debt today is just 7-8% of GDP, but even then, as the head of state noted, we would like it reduced to zero.

At the same time, in Aliyev's opinion, Azerbaijani investments abroad should be increased before the end of the year and after that. Today bulk investments are being made in Turkey, Georgia, Russia, Ukraine, France, Britain, Romania, Greece and other countries. The most sizeable, of course, will be made in Turkey - 17bn dollars, and in this respect Azerbaijan will be that country's largest investor. "Azerbaijan is well known in the world today as an investor-country, and as a donor we are providing funds for foreign financial structures. At the same time, major investments are being made. Our investment portfolio must be arranged in such a way that we protect ourselves as much as possible from risks," the president pointed out.

Again, the essence of our whole policy is ensuring stability in the country's economy as a whole and in the well-being of each citizen. Incidentally, today a 7.6% increase in personal incomes is significantly above inflation (2.3%), which creates additional opportunities for an improvement in the situation in this direction. It has to be said that the Central Bank of Azerbaijan is predicting that price stability will be maintained in the country until the end of the year. "Since the beginning of the year weighted average inflation in countries that are the country's main foreign-trade partners has exceeded inflation in Azerbaijan by 2.8 percentage points. Price stability is expected to be maintained until the end of the year," the head of CBA's board, Elman Rustamov, said, among other things.

The government is continuing to keep the development of the country's regions in its focus of attention. And the fact that 11 of the 19 projects which were started last year and were linked with the repair, restoration and reconstruction of rural roads, which are of special importance in the development of the regions, have been completed this year is a clear example of that. Furthermore, according to Minister of Economic Development Sahin Mustafayev, measures continue to be implemented to develop entrepreneurship and businessmen who wish to develop their businesses in the regions continue to stand apart. It is no accident that 70% of preferential credits issued via the National Entrepreneurship Support Fund go to the regions; 30% to settlements in Baku; 67% to the agrarian sector and 33% to the production and processing of industrial output. Besides this, with the object of steadily improving the business environment legislation is being perfected, administrative procedures are being simplified and transparent mechanisms are being applied. At the present time state bodies are providing 426 types of services in electronic form. The extension of the activities of "ASAN xidmat" is also contributing to the development of entrepreneurship. 

Strengthening the private sector also helps to consistently resolve vital social problems, in particular how to cope with a very important problem for society - unemployment. Thus, over 1,200,000 new jobs, including 910,000 permanent ones, have been found in Azerbaijan over the past ten years. Ultimately, unemployment will be reduced to 4.8% before the end of the year, according to predictions. Poverty has been reduced ten fold in the past ten years and is now less than 6%. As is known, the government's main task for the next few years is to reduce these numbers even more. 

Stable forecasts

Positive rates of development are due to be maintained in all areas of socio-economic life. In any event, judging by macroeconomic forecasts and the concept of Azerbaijan's socio-economic development, which was prepared by the Ministry of Economic Development for 2014 and the following three years, next year the real growth of the country's GDP is expected to be at a level of 5.2%; in 2015 at 5.8%; in 2016 at 4.8% and in 2017 GDP will reach 67.3bn manats with a growth rate of 6%. In short, having achieved a certain level of economic development, the country regards as of paramount importance the question of maintaining stable rates of growth and the rational use of existing potential. At the same time, according to forecasts, the growth of the ratio of the non-oil sector of the economy will continue in the mid-term perspective - from 61.5% of GDP in 2014 to 72.4% in 2017.

The total volume of investments in the economy for 2014 is forecast at a level of  18.4bn manats - 2.9% higher than the figure for 2013, and 70.4% of investments will be internal and 29.6% foreign. According to the government's forecasts, next year 68.5% of investments will be made in the non-oil sector.

A more detailed picture for next year is clear on the basis of information from the recently published Azerbaijani draft state budget for 2014, which has already been presented to the Milli Maclis [parliament]. According to this document, incomes for next year are forecast at a level of 18.4bn manats.

State budget expenditure for next year is forecast at 20.06bn manats, which is 1.1% above the prediction for 2013, and the level of social expenditure (up by 5.9%) is also increasing. Thus, the proportion of socially directed spending in the expenditure structure of the state budget compared with 2013 will increase by 1.3 percentage points and amount to 26.6%, of which 15.1% will be accounted for by wages and 9.1% by pensions and social benefits. Along with this there will also be an increase in the volume of budget financing of all-purpose programmes in such socially important spheres as science, health, education, culture, sport and other spheres, amounting in 2014 to 885.3m manats, which is 37.3% higher than provided for in the state budget for 2013.  

A substantial amount - 14.7% of the overall volume of budget expenditure - will be spent on strengthening national security, defence capability and the corresponding material-technical base. Compared with the forecasts for 2013, defence spending for next year is due to increase by 8.7%. This is a necessary rate of growth for the country which is still in a state of war with a neighbouring state. Today, as President Aliyev has pointed out, we are at least 10 times stronger than Armenia in the economic sphere, and we have also succeeded in achieving superiority in the military sphere. In short, economically Azerbaijan is now ready not only to stand up for its lands, but also to win them back by military means if needs be, and because of this defence expenditure must logically increase from year to year…

Thus, the 2014 budget has also been forecast with a deficit - of 2.87% of GDP, but bearing in mind that according to the figures for 9 months, the implementation of the current budget is proceeding with a surplus with a similar forecast, then one may be bold enough to hope that this difference is a kind of safety net for the government.