MIRROR OF ECONOMY

The ratings of the World Economic Forum (WEF) on the index of global competitiveness reflect socio-economic state of countries.

The history of the WEF reports (The Global Competitiveness Report) dates back to 2004. The report is considered the most complex indicator of competitiveness among various economies of the world, which determines the ability of countries to ensure stable rates of economic development.

The scope of researches covered in the report can be defined by 113 variables that characterize the competitiveness of countries and are combined into 12 benchmarks, including macroeconomic indicators, financial and commodity markets, employment, education, healthcare, corporate competitiveness, innovations, infrastructure development, etc.

Azerbaijan is the best among CIS countries

According to The Global Competitiveness Report for 2017-2018, Azerbaijan improved its performance by two positions, ranking 35th among 137 countries (index 47). Thus, Azerbaijan topped the list of all CIS countries including Russia (38), Kazakhstan (57), Georgia (67), Armenia (73), Tajikistan (79), Moldova (89), Ukraine (81), and Kyrgyzstan (102).

Top ten most competitive economies in the world are Switzerland, the United States, Singapore, the Netherlands, Germany, Hong Kong, Sweden, Great Britain, Japan, and Finland.

The reforms carried out in Azerbaijan were highly appreciated by WEF experts, which was confirmed by the country's position as a leader in the CIS space. It should be noted that Azerbaijan achieved this under difficult conditions for the domestic economy due to the fall in oil prices.

"The estimates of the Davos World Economic Forum reflect our economic success. Azerbaijan rose from the 37^th to 35^th position this year and further improved its rating. This is our great success, a historic achievement. I must also note that we are leaders among the CIS countries. In fact, this means recognition of the success of our economic policy by the most prestigious global economic forum, the Davos Forum," said President Ilham Aliyev.

It should be noted that the index of 4.7 and 35^th place in the WEF rating is the best result of the last five years. According to The Global Competitiveness Report for 2012-2013, Azerbaijan received index of 4.4 and ranked the 46^th among 144 countries. In 2013-2014 - 4.5 and 39^th (148 countries); in 2014-2015 – 4.5 and 38^th (144 countries); in 2015-2016 - 4.5 and 40^th (140 countries); in 2016-2017 - 4.6 and 37^th (138 countries); and in 2017-2018 - 4.7 and 35^th (137 countries).

At the same time, the WEF rating allows determining directions the high results were achieved, and where it is necessary to strengthen work and speed up the reforms.

Unfavorable external background

In previous years, Azerbaijan's macroeconomic indicators have always received the highest results in the ratings of international organizations, which contributed to raising the overall rating. But a sharp deterioration in external factors had a negative impact on macroeconomic indicators and led to a drop in GDP.

Accordingly, experts of the WEF ranked Azerbaijan the 68th based on macroeconomic indicators. Last year, national GDP fell by 3.8% and given the economic decline in terms of GDP, Azerbaijan was ranked the 64^th. To mitigate this negative influence, radical reforms were implemented in Azerbaijan, which were subsequently expressed in the stable growth of non-oil sector of the economy.

The fall in oil prices in many CIS countries caused a wave of devaluations of national currencies, and then inflation in national economies. Following the results of 2016, inflation in Azerbaijan was 12.4%. Accordingly, WEF experts ranked Azerbaijan the 127^th. Meanwhile, following the results of 2017, inflation may be close to a single-number indicator.

This will be facilitated both by an increase in the export of Azerbaijani products of the non-oil sector, and by the stabilization of oil prices within $50-60 per barrel.

Finally, macroeconomic indicators in Azerbaijan will improve by 2018, when the national economy reaches a stable growth, and inflation, perhaps, returns to the usual indicator of 3-4% per year.

Limited access to finance

Experts of WEF rank as a serious problem the access to financial resources impeding the development of business in Azerbaijan.

In general, the access of the business community and the public to financial resources before the fall of oil prices was one of the weakest features of the national economy. Businesses, as a rule, took loans from banks for short-term trading operations, as interest rates were very high, which prevented their wide use in the real sector. The bankers explained the high cost of loans with a high level of risks of non-return on the part of entrepreneurs, especially in the regions of the country.

The banking crisis of 2014-2015 further aggravated the problem of non-payments, as double devaluation of the national currency sharply increased the share of overdue loans. Together with the outflow of household deposits from banks, 12 banks of the country were closed.

Apparently, the access to the capital market for businesses and the population has narrowed. It is not surprising that, according to the financial market, Azerbaijan was on the 79^th place. The rating of the reliability of the banks of Azerbaijan is even worse - 85^th.

The improvement of the banking sector and the availability of loans for the business community remain at the center of ongoing reforms. The most vivid confirmation of this can be the decision taken by the President of the Republic of Azerbaijan on the establishment of the Credit Guarantee Fund, which must radically change the situation in the banking sector. It is about the fact that the fund will take part of the interest risks on loans issued by banks on business projects of entrepreneurs. Thus, one can expect that next year the index on access to financial resources of business circles in Azerbaijan will significantly improve.

Root reforms in education and health

The most controversial for the Azerbaijani government is always assessments from international organizations of the education and health system in the country.

In terms of healthcare and primary education, Azerbaijan was ranked the 74^th. A negative assessment of the health system is due to the number of deaths - 27 per 1000 newborns (100th), and a relatively low life expectancy in the country - 70.8 years, which placed the country in 94th place. For example, in Switzerland, whose economy is considered to be the most competitive today, the number of deaths is only 3.4 per 1000 newborns, and the life expectancy is 83.2 years.

Hopes for improving the health system in Azerbaijan are associated with the introduction of mandatory health insurance (CHI). Currently, a pilot project on MHI is being implemented in the cities of Mingachevir and Yevlakh, and since 2018, it is planned to launch a state program on MHI in Azerbaijan as a whole.

According to WEF experts, the situation with higher education and training is somewhat better than in health care, but the 68th place indicates serious problems in this area. The worst result in Azerbaijan in obtaining additional education is the 90th place, as well as the management of schools (72nd) and the quality of exact sciences and scientific education (66th).

Note that in the issue of school management, changes are expected in connection with the transition of educational institutions to a self-financing system until 2020.

It is no secret that many parents hire tutors for their children. That is, perhaps, a question of creation of various paid circles and other additional services in schools. But, as time shows, educational reforms should be implemented in Azerbaijan to increase the competitiveness of the national economy.

Reforms is the path to success

Of course, it is possible to continue further analysis of all 113 variables in The Global Competitiveness Report 2017-2018 and indicate areas where it is necessary to speed up the reforms. But for the sake of justice, it should be noted that the Azerbaijani government, through reforms, has made significant progress in improving the business environment in the country. According to two indicators, the number of procedures and time required to start a business, Azerbaijan shares the second and sixth places, respectively.

The WEF experts highly estimated the ongoing agrarian policy of the Azerbaijani government (12th place). Please note the 14th place for the acquisition of advanced technological products, which means good prospects for the Azerbaijani economy in future.

The efforts of the government to continue reforms in the country will further improve performance indicators of Azerbaijan, which will ultimately prove to be among the top ten countries of the world with the most competitive economy.