Regions and Countries

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p. 14 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Azerbaijan Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Azebaijan

Economic performance

Economic growth: Real GDP growth continued to be strong at 11.4 percent in 2000, following an impressive 7.4 percent in 1999. Strong performance in the oil and oil-related subsectors, which grew by more than 20 percent and now accounts for about 26 percent of GDP, was the major contributing factor. Agriculture, on the other hand, registered only an estimated 6 percent increase. Growth remained slow in the other non-oil sectors.

Employment: In 2000, unemployment officially stood at only 1 percent of the labor force, but underemployment is estimated to have been about 18 percent, a level similar to that for 1999. Unemployment among those aged 29 or below accounted for 53 percent of the overall total.

Inflation: Consumer price inflation accelerated sharply during the first few years following independence, but the macroeconomic stabilization program launched in 1995 brought inflation down to 3.7 percent in 1997. In 2000, consumer price inflation measured 1.8 percent, compared with negative 8.5 percent in 1999. The return of inflation resulted from the easing of monetary policy beginning in mid-1999, which caused the broad money supply to increase above 20 percent in 2000, compared with 15 percent in 1999. Rising world oil prices also contributed to the return of inflation.

Fiscal balance: The total fiscal deficit in 2000 is estimated to have fallen to 2.3 percent of GDP from 5.4 percent of GDP in 1999. Reduction in public expenditure, estimated at 21.5 percent of GDP in 2000 as compared with 25 percent of GDP in 1999, was the main factor contributing to lower fiscal deficit. Reduced levels of capital outlays and spending on wages and salaries brought down the expenditure level. Total government revenues fell slightly to 19.2 percent of GDP in 2000, compared with 19.6 percent of GDP in 1999.

External sector: The current account deficit fell in 2000 to $43 million, or 0.9 percent of GDP, from $600 million (15 percent of GDP) in 1999. The trade balance improved in 2000, registering a surplus of $400 million, or 8 percent of GDP, compared with a deficit of $408 million (10.2 percent of GDP) in 1999. Revenues from oil exports, which benefited from rising world oil prices, were the main contributing factor. Total exports rose to $1.9 billion in 2000 from $1.0 billion in 1999. Total imports also increased, but by a much smaller degree, to $1.5 billion from $1.4 billion during the same period, while imports in the oil-related subsector fell by 28 percent. With the end of the major investment phase of the Azerbaijan International Operating Company, a major oil consortium, gross foreign investment fell to $493 million in 2000, compared with $688 million in 1999. Gross foreign exchange reserves are estimated to have increased slightly from $674 million in 1999 to $680 million by the end of 2000. Total external public and public-guaranteed debt rose to $1.2 billion by end-2000, equivalent to 24 percent of GDP. Meanwhile, external debt service costs rose slightly to 4.4 percent of exports of goods and services in 2000, compared with 4 percent a year earlier.

Domestic policies: The Government continued its tight fiscal stance, but eased monetary policy in 2000 in response to the rebound in world oil prices and the gradual return to economic stability in Russia and other neighboring countries. With the adoption of a more flexible exchange rate, the manat (M) depreciated to an average level of M4,474 to the US dollar in 2000, compared with M4,126 per US dollar in 1999, helping promote export competitiveness. The amended Tax Code, approved in July 2000, is expected to expand fiscal revenues by broadening the tax base. However, increasing much-needed social expenditures while keeping the fiscal deficit under control remains a challenge for the Government, as do managing larger projected oil revenues and diversifying industry to reduce oil dependence.

ADB operations

DB’s interim operational strategy for Azerbaijan focuses on reducing poverty and raising the people’s living standards in a sustainable manner. ADB’s operations will initially enhance human development; promote sustainable growth, including private sector development; and support good governance and institutional strengthening. Two operational areas have been prioritized: (i) direct assistance to the poor and (ii) poverty reduction through non-oil sector development.

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