THE RADICAL TURN IS BEHIND

The first year of President Ilham Aliyev's second term in office was marked by turbulent times in the global economy. The crisis nearly broke the industry in many countries, while the sharp decline in oil prices "finished off" the already shaky economic foundations even of superpowers. Ideally, Azerbaijan was also expected to have a difficult time - given the fact that on average, the price of oil has not risen above the 54-dollar mark per barrel this year despite the original forecast of $70, we have to expect a recession in many segments of the economy.

But Azerbaijan avoided the serious consequences of the crisis largely because the government's economic policy after the presidential election remained the same - the head of state continued his policy, launched in 2003-08, to maintain stable growth in all spheres of economic life, correcting some points in the light of the crisis and adopting, for example, a policy of more conservative financial management. The outcome of the decisions taken is obvious.

Significant results

At a cabinet meeting dedicated to the results of 9 months of this year Ilham Aliyev said that "Azerbaijan is one of the few countries that did not address any other country or international financial organization during the crisis. We live by ourselves. Therefore, Azerbaijan can defend its position in the international arena and is conducting an independent policy, and this policy is of benefit to the people of Azerbaijan." In other words, the most important thing for Azerbaijan today is the economic independence of the country, even against the backdrop of difficulties in connection with the global crisis.

In principle, against the background of developments in the global economy, even a one-per-cent growth in gross domestic product (GDP) is a significant achievement. The decline in prices for oil - the main product of our country, limited export opportunities in other areas in connection with the crisis, the decline in production indicators in a number of industries - all this could not but affect growth indicators. But to the surprise of many foreign analysts and reputable international financial institutions, GDP growth in 9 months accounted for 6.1 per cent. Given that according to the results of 2008, this figure was slightly higher than 10 per cent, the president rightly described the current level as "a wonderful result and great success which proves that Azerbaijan's economy is diversified and is not dependent on any sector of the economy."

It is noteworthy that despite the recession in the industrial sector in almost all countries of the region, Azerbaijan has secured a 5-per-cent growth in this segment, managing not only to continue the development of existing enterprises, but to open new ones, involving local resources (including preferential loans provided by the state to the private sector) to this end and scarce foreign investments, while in most countries of the CIS, GDP has decreased on average by 9 per cent and industrial output - by 14 per cent since the beginning of the year.

It must be noted that a significant role in the diversification processes is played by major infrastructure projects launched in the country - apart from improving transport, communications and other living conditions, they provide orders to the industrial sector of the country and create more jobs. True, some of these projects had to be slowed down at the beginning of the year, but as the world crisis slowed down, the head of state issued more orders and instructions to expedite their implementation. This means that in the future, the number of ceremonies to open new infrastructure facilities will increase significantly, although there have been quite a few of them in the past three quarters...

This year, Azerbaijan also took a number of important steps to ensure its food security - a record amount of grain was produced for the first time - 3 million tonnes, which was made possible through integrated measures implemented in the agrarian sector. Issues of storing perishable agricultural products are being resolved. All these measures will eventually lead to the cessation of the subjective growth in food prices, which the government has been fighting for more than a year.

Moreover, the Azerbaijani government has even benefited from the crisis, resolving another important economic problem of recent years - inflation. In nine months, this figure accounted only for 2.1 per cent, while in 2008, it reached 20.8 per cent! According to CBA forecasts, inflation in the country, according to information available at the end of this year, will account for 2-2.5 per cent. According to the chairman of the Central Bank, Elman Rustamov, it is also planned to maintain inflation at that point in future. In particular, the inflation rate expected in Azerbaijan in 2010 is 3-5 per cent, but it is possible that it may fall to even lower levels.

This factor has a natural and very positive impact on the incomes of the population - salaries and pensions have not shrunk, while some prices have fallen. Thus, the population's cash income in nine months increased by almost 10 per cent, i.e. the real increase accounted for 8 per cent. According to President Aliyev, this is a rather rare figure for the crisis worldwide. The revenue growth also affected the growth in the population's deposits at banks - people began to accumulate more "extra" money, and it is noteworthy that this occurred at a time when banks in many countries lost most of their customers who withdrew their money for fear of bankruptcy. As we see, the timely actions taken by the Central Bank of Azerbaijan both in relation to the stability of the manat as well as supporting the entire banking system not only retained public confidence, but also greatly enhanced and strengthened it.

The key to success

All the above data indicate that the Azerbaijani economy will complete 2009 better than expected. In any case, even international financial institutions, which are usually reluctant to make optimistic forecasts, have no doubt about this. Thus, the International Monetary Fund forecasts a real GDP growth of 7.5 per cent in the republic in 2009 and the Asian Development Bank - 8 per cent, and in 2010 - 7.4 and 6.7 per cent respectively. Moreover, the IMF predicts continued dynamic development in the non-oil sector with a growth of 5 per cent next year and the Asian Development Bank - 5-7 per cent.

Currently, the private sector's share in Azerbaijan's GDP is 85 per cent, and in the near future, this ratio will grow even more. This is facilitated, first, by the simplification of conditions for preferential lending to business, and second, by the ongoing sectoral reforms of an institutional nature and the deliberate restriction of state participation in major projects. According to the World Economic Forum, in terms of competitiveness Azerbaijan ranks 51st in the world and first in the CIS, which proves the diversification of the country's economy.

Regarding the possible failure to implement this year's state budget forecasts due to the discrepancy in the oil price set in the budget and the actual market indicators, it has not caused particular concern yet. Thus, in 9 months alone, the forecast for revenues in the state budget was fulfilled by 91.9 per cent. At the same time, 30.1 per cent of expenditure, or 1,942 million manats were socially-oriented, which is 426.5 million manats or 28.2 per cent more than in the same period last year. So there is every chance to complete the year without a deficit.

In other words, the general level of development in Azerbaijan's economy over the past 9 months can be considered successful, and as we have already noted, the key to this success were mainly the achievements of 2003-08. If the country has achieved such results in the peak of the global crisis, then there can be no doubt about the stability of good indicators in the future.