Expert: Azerbaijan's GDP growth to be higher than WB forecast

Data provided by the World Bank regarding Azerbaijan's GDP growth forecasts for the coming years, have been grossly underestimated, Fuad Alizade believes.

The economist told local media that Azerbaijan's economy will increase at a higher rate, and GDP growth in the coming years will stand at least at 4-5 percent.

Alizade was commenting on the WB's recently endorsed 2016-2020 Country Partnership Framework for Azerbaijan, which was adopted by the WB Group’s Board of Executive Directors.

According to the 118-page document, real GDP growth for the country is estimated at 1.5 percent for 2015, 2.6 percent in 2016, and 2.7 percent in 2017. World Bank experts forecast the decline in oil GDP to be at 1.5 percent in 2015, 1 percent in 2016 and 1 percent in 2017. After a sustainable annual growth rate of 9 percent, the non-oil GDP will decrease by 3.6 percent in 2015, and 3.8 percent in 2016, and reach 3.9 percent by 2017.

Azerbaijan's GDP per capita will fall from $7,938 in 2014 to $5,447 in 2015, and then rise again to $5,778 in 2016 and to $6,094 in 2017. Inflation in 2015 will be in the double digits at 10 percent, 4.6 percent in 2016, and 3.5 percent in 2017.

The nominal GDP will decrease from 58.9 billion manats ($56.1 billion) in 2014 to 52.6 billion manats ($50.1 billion) in 2015. This trend will continue in 2016 and 2017 as well. Nominal GDP growth will amount to 56.5 billion manats ($53.8 billion) in 2016 and 60.4 billion manats ($57.5 billion) in 2017.

Alizade said that favorable conditions will be created thanks to the development of the non-oil sector of the Azerbaijani economy.

"I do not agree with the opinion that the non-oil sector is in a depressive state, and the country's economy is maintained only by oil exports. Today, the Azerbaijani government is seeking to introduce modern methods to develop the non-oil sector. As of today industrial parks, breeding facilities are operating in Azerbaijan, construction of the international transportation hub is underway in full swing, steps are being taken to promote tourism, and, of course, the agrarian sector does not remain on the sidelines of this process," he noted.

The expert believes that the price of oil will rise to $70 per barrel, and it will make significant changes to the GDP indicators. If in previous years Azerbaijan's economy developed in spurts, now the process is more restrained.

"It is wrong to hope for upswings in the non-oil sector. This direction will develop slowly but surely," the expert concluded.

The world’s financial institutions forecast Azerbaijan's economic growth at various levels. The International Monetary Fund expects a 0.6 percent economic growth in the country for 2015. The Asian Development Bank expects that the GDP growth in Azerbaijan will be equal to 3 percent in 2015. The European Bank for Reconstruction and Development (EBRD) kept the forecast of economic growth in Azerbaijan in 2015-2016 at 1.5 percent.

Economists believe that the main factors that can affect the dynamics of GDP are oil prices, global competitiveness of the national currency, and funds allocated from the state budget for investment.

Energy-rich Azerbaijan does not concern itself over declining oil prices, now hovering around $50 per barrel. The government has been taking measures to decrease dependence on petrodollars received from oil and gas exports for quite some time.

The government is also paying special attention to diversification, as a result of which Azerbaijan’s non-oil economic sectors have grown by 10 to 15 percent over the last two to three years. Relevant programs were adopted at the state level on the development of the non-oil sector, which covers mainly agriculture, industry, and IT sectors.

2014 was declared the Year of Industry and a number of measures associated with its development were taken. It is expected that this will give significant impetus for the economic diversification and development of the non-oil sector.

2015 was declared the Year of Agriculture in Azerbaijan, which is expected to give new wind to the development and modernization of agriculture, ensuring a complex and systematic approach to the settlement of problems in the agrarian field, involving the government's administrative and financial resources in this sector, and promoting the country's agrarian potential.

Azerbaijan plans to export products worth $26.8 billion in 2015, some $2.7 billion of which will be goods in the non-oil sector. The Azerbaijani government predicts the share of non-oil sector in Azerbaijan's GDP to be at 65.1 percent for 2015, which is 5.5 percent higher than the forecasts for 2014 and 8.5 percent higher than in 2013.