MACRO- ECONOMIC BOOM

The government of Azerbaijan, in line with its legislative obligations, has collected all the information on the social and economic achievements of 2007 in a single report and submitted it to the Milli Maclis. Moreover, after last year's feedback the information supplied this year by the Cabinet of Ministers was wider and more detailed. In presenting the report, Prime Minister Artur Rasizada summed up not just the results of 2007 but of the last four years of the government's work.

GDP and investment

The prime minister said that there has been a 230-per-cent real increase in GDP over the past four years. GDP in the non-oil sector has increased by 150 per cent, nominal GDP per capita has increased by 340 per cent, the population's income has increased 250 per cent, the average monthly wage by 280 per cent and state budget revenue 490 per cent. 

GPP in 2007 was 25.2 billion manats, with growth of 25 per cent compared to 2006. GDP per capita was $3,500, an increase of 23.6 per cent. The 11.3-per-cent growth in added value in the non-oil sector is an important indicator of the reduction of the economy's dependence on the oil sector. The country's strategic currency reserves, including the State Oil Fund's resources, topped $7.2bn.

The significant growth in state budget revenue over the past four years has enabled it to become a social and investment budget. Over this period state budget revenue increased from 1.2bn to 6bn manats. "This figure has been achieved not only as a result of economic growth, but thanks to effective fiscal policy," Artur Rasizada said. As part of state budget expenditure, spending on social needs increased threefold, including a 340-per-cent increase in wages and 2,200-per-cent increase in capital investment. In the reporting year, state budget revenue was 55.3 per cent more than in the previous year and expenditure 59.9 per cent more.

Last year investments of 6.8 billion manats were made in the development of the economy and social sphere from all financial sources, or 17.8 per cent more than last year. As part of the main capital 3.5bn manats (51 per cent) were used in the development of the oil sector and 3.3bn manats (49 per cent) in the development of the non-oil sector. Investment allocated to the development of the non-oil sector increased by 28.8 per cent, compared to 2006. Domestic investment accounted for 60 per cent of all investments and foreign investment for 40 per cent. During the year domestic investment increased by 50.7 per cent and foreign investment decreased by 10.9 per cent.

Meanwhile, the unresolved nature of the Nagornyy Karabakh problem meant that the army has become one of our main areas of activity. "This is illustrated by the 600-per-cent increase in defence spending over the past four years," Artur Rasizada said. In the reporting year, the state budget allocated 26.7 per cent more funds to defence than in 2006. Serious organizational and technical work has been done to establish the recently created Ministry of the Defence Industry. The prime minister said that work has begun at enterprises to develop the production of some types of special technology, cooperation agreements have been signed with several foreign countries and bilateral business relations have been created.

If it weren't for inflation

However, the fact that the consumer price index reached 16.7 per cent last year rather spoils the overall economic backdrop. The prime minister acknowledged that inflation has been boosted not only by processes on world markets, but also by growing state budget expenditure on numerous social and infrastructure projects, aimed at dynamically developing the economy, by the growth in the public's buying power and by the rapidly increasing money supply.

"In the prevailing conditions the main objective, alongside other measures, was to ensure that growth in the income of the population exceeded the level of inflation. As a result, in 2007 the population's income grew by 240 per cent more than the consumer price index and the trend will continue this year too," Artur Rasizada said. Last year the average monthly wage increased by 42 per cent and labour pensions by 76 per cent. The minimum monthly wage and wages in budget-funded organizations, the main part of labour pensions and monthly benefits paid to forced migrants all increased by up to 50 per cent. The sum paid to low-income families has been increased from 30 to 40 manats. "More than 78,000 families receive targeted social assistance and the monthly assistance to every family was 80 manats," the head of the government said. 

The poverty level fell from 45 per cent in 2003 to 16 per cent in 2007, as a result of socially targeted action on poverty reduction. In 2007 on the instructions of President Ilham Aliyev a draft State Programme on Poverty Reduction and Sustainable Development in the Azerbaijani Republic to 2015 was drawn up. The programme's main aim is to reduce poverty to the level of developed countries by 2015, Artur Rasizada said.

Continuation

The year 2008 will see a new stage in the development of the infrastructure of Azerbaijan and the implementation of major infrastructure projects. However, substantial work has already been done in this regard and its results can be felt in the country's everyday life.

For example, capacity in electricity generation topped 5500 megawatts after five modular power stations with an overall capacity of 452 megawatts came on stream in a short time. "This not only met domestic demand, but increased the opportunity to export electricity and created the right conditions to ensure the country's energy security," the premier stressed.

Pride can also be taken in the transport sector over recent years. The funds spent in the past four years on building and repairing the road network, on bridges and flyovers and modernization of all means of transport increased fivefold and topped 1.4bn manats. The material and technical base of the sector has been significantly built up: 14 locomotives have been bought, 12 planes and helicopters, six tankers, 253 buses and 75 underground carriages. Reconstruction work has been completed at Naxcivan and Ganca international airports. Intensive reconstruction work on the Great Silk Road and North-South transport corridors has also continued. The foundations have been laid for the Baku - Tbilisi - Kars railway which has great economic and political significance for the republic. 

The communications and telecommunications sector - a modern-day priority - has seen growth of 32 per cent. Work specified in the Electronic Azerbaijan Programme has continued with the aim of ensuring the development of communications and information technology; e-mail addresses have been created for the majority of state bodies; important work has been done to build a national system of information security and update the normative and legal base.

One of the main infrastructure problems today remains water supply and sewerage: for many years cost has held back the implementation of several existing projects in this sector. However, with the increase in the state's income, the situation has begun to change before our eyes. The Oguz - Qabala - Baku water pipeline provides ample illustration of this. On the other hand, credit agreements on favourable terms were signed last year for the reconstruction of the water supply and sewerage system throughout the country after successful negotiations with international financial structures; the projects are to take three years.

Therefore, 2007 really can be described as one of the most successful for Azerbaijan in terms of macroeconomic and social indicators. The government report was approved this year with hardly any criticism which shows that the current development trends must be maintained and, most important, stable development must be supported against the background of economic collisions in the globalizing world.