CAERC: Growth rates of Azerbaijan’s economy in 1H2021 exceed international forecasts
Growth rates of Azerbaijan’s economy in the first half of 2021 exceeded forecasts of international organizations, said Executive Director of the Center for Analysis of Economic Reforms and Communications (CAERC), Doctor of Economics, Professor Vusal Gasimli, according to Azerbaijan in Focus, reporting Trend News.
According to Gasimli, the main priorities of the state budget of Azerbaijan are the restoration of the territories liberated from Armenian occupation [in the 2020 Karabakh war], the development of the army, growth of the economy, and social welfare of the population, including meeting the needs of the families of martyrs and participants of the war.
Social expenditures of the state budget in the first half of 2021 amounted to 44.1 percent of actual expenditures and exceeded 5.1 billion manat ($3 billion).
“Current expenses exceeded last year’s figure by 2.6 percent, or 127.3 million manat ($74.8 million). They also include salaries, stipends, and social benefits, medicine, and food costs according to economic classification. Social payments in Azerbaijan have increased by more than 60 percent over the past three years,” he noted.
“During this period, the minimum pension in Azerbaijan increased by 82 percent, the average pension – by 60 percent, the average benefit – by 100 percent, the amount of targeted social assistance – by 72 percent. With a living wage of 196 manat ($115.3), the average pension is 360 manat ($211.7), and the minimum wage is 250 manat ($147),” Gasimli further said.
Besides, according to the executive director, the growth rates of the non-oil sector of the Azerbaijani economy in the first half of 2021, compared to other countries, exceeded the forecasts of the International Monetary Fund (IMF).
“By early July, the growth of the Azerbaijani economy reached 2.1 percent, while the growth of the non-oil sector amounted to 5.1 percent. Moreover, growth in the non-oil industry amounted to 16.6 percent, in crop production – 8.9 percent, in livestock – 2.4 percent, in the information and communication services sector – 5.5 percent, and in retail trade – 1.7 percent,” he said. “From January to June 2021, Azerbaijan’s exports reached $8.8 billion, increasing by $1.1 billion, or 15 percent compared to the same period of last year.”
The center’s director stressed that a positive balance of $3.4 billion was formed in Azerbaijan’s foreign trade turnover. According to him, the non-oil sector is becoming the main driver of ensuring the revenues of the state budget of Azerbaijan.
“In the first half of 2021, the state budget received 4.7 times more funds than predicted. During this period, Azerbaijan’s non-oil exports amounted to more than $1.16 billion. Compared to the first half of 2020, this figure increased by $248 million, or 27 percent,” Gasimli said.
He also noted that in the reporting period, the export of vegetables and fruits amounted to more than $306 million, plastics and products from them – almost $180 million, cotton – $123 million, aluminum and products from it – $61 million, ferrous metals and products from it – $53 million.
Besides, according to him, the chemical industry accounted for about $36 million, the export of electricity amounted to $33 million, sugar – over $19 million, and the export of alcoholic and non-alcoholic beverages – $6.8 million.
Thus, from January to June of this year, the export of sugar increased by 2.5 times, ferrous metals and products from them – by 2.4 times, cotton yarn – by 2.4 times, cotton fiber – 2.1 times, plastics and products from them – by 84 percent, aluminum and products from it – by 49 percent, drinks – by four percent, compared to the same period in 2020,” Gasimli also said.
The professor noted that in the reporting period, the state budget received more than three billion manat ($1.7 billion) through the non-oil sector, which is 9.5 percent more than a year earlier. It follows that tax revenues from this sector are twice as high as its growth rates.
“In the first half of the year, almost 4.7 billion manat ($2.76 billion) was transferred to the state budget from the State Oil Fund of Azerbaijan, which is 1.4 billion manat ($820 million or 23 percent) less than predicted. Growth in revenues from the non-oil sector compensated for the decrease in these revenues,” he further noted. “Besides, the growth of revenues to the state budget was facilitated by the implementation of reforms in the field of public administration, including the improvement of tax and customs administration, the fight against the shadow economy.”
“The state budget received by 24.4 percent more funds through the State Tax Service of Azerbaijan than it was predicted, through the State Customs Committee – by 14.6 percent, and through other structures – 4.7 times. Incomes to the state budget from rent and privatization of state property in the first half of the year exceeded the figures for the same period of 2020 by 1.6 and 56.3 times, respectively,” Gasimli said.
He said that stabilization in the financial-banking sector of Azerbaijan, after the crisis caused by the COVID-19 pandemic, continues, and liquidity and capital adequacy are at a high level. Since early 2021, credit investments have grown by 3.3 percent, deposits – by 7.7 percent, deposits of the population – by 5.3 percent, and net external assets of banks – by 10.3 percent.
“The priorities of the country’s monetary policy this year, according to him, are the stability of the national currency and prices, the effectiveness of the monetary policy, ensuring the stability of the financial sector, and supporting the recovery of the economy in the post-pandemic period with the use of regulatory incentives,” he said. “Currently the main task is to expand financing of the economy from various sources, that is, to increase its capital investments.”
Gasimli also said that maintaining the stability of the Azerbaijani manat and low inflation, on one hand, don’t allow turning the growing nominal incomes of the population into an inflationary ‘bait’, and on the other hand – create preconditions for economic growth.
According to him, despite the volatility of the exchange rate of all currencies in the region, including the Turkish lira, the Russian ruble, the Iranian rial, and the Georgian lari, the rate of the Azerbaijani manat remains stable.
“The stability of our national currency is based on such fundamental principles as a surplus of the consolidated budget and balance of payments, as well as a six-fold excess of strategic foreign exchange reserves over external debt,” he said.
Despite the fact that the consolidated budget for 2021 is projected with a deficit of 7.33 billion manat ($4.31 billion), a surplus of over 2.57 billion manat ($1.51 billion) was actually formed in the first six months of this year. The total balance of payments in the first quarter reached $326 million, Gasimli added.
“Although the pressure of import inflation arose with the rise in world prices, price stability in Azerbaijan is maintained through the use of the exchange rate, money supply, and interest rates,” he said.
He stressed that in the ‘Doing Business’ annual research of the World Bank Group, Azerbaijan has climbed from 34th to 28th position. In the Index of Economic Freedom report, the country climbed from 44th to 38th position. In the global ranking of the Global Cyber-Security Index, Azerbaijan has advanced by 15 positions up to 40th place among 194 countries.
He noted that according to the report on the ‘Assessment of Readiness for Cross-Border Paperless Trade’ prepared by UNESCAP (United Nations Economic and Social Commission for Asia and the Pacific), Azerbaijan took a leading position among neighboring countries and the CIS.
“Our country showed an increase in comparison with 2019 by five percent and took first place. The total indicator made up 86.02 percent,” concluded Gasimli.