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Annual Report 2001

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Azerbaijan

Economic performance

Azerbaijan’s real GDP growth rate in 2001 was 9.9%, down from 11.1% in 2000. Economic performance in 2001 was generally strong, mainly because of growth in the non-oil subsector of 12%. In contrast, growth in oil and gas was 5%. Inflation as measured by the consumer price index (CPI) remained at 1.5% in 2001, compared with 1.8% the previous year. Benefiting from more rapid GDP growth and buoyant world oil prices, government revenues reached 18.0% of GDP in 2001, though their heavy reliance on the oil and gas subsector continued during the year. The general fiscal balance position slightly improved from a deficit of 2.2% of GDP during the first half of 2000 to a deficit of 2.1% of GDP the same period in 2001. Owing to an improved trade balance, the current account improved with the deficit falling from 3.4% of GDP to 2.3% of GDP, despite the growing deficit in the nonmerchandise accounts. The country’s export growth of 7.9% was fueled mainly by oil. Because of a sharp increase in income outflows from foreign oil consortia and subdued oil exploration activities, oil equipment imports fell, causing overall imports to decrease by 5.4% in 2001. Foreign investment, mainly foreign direct investment in the oil and gas subsector, recovered. Despite increased capital repayment and growth in the state oil fund, gross international reserves improved to $744 million in 2001, equivalent to about 5 months of imports. Due to significant underreporting and large employment in the informal sector, the actual unemployment rate is estimated at 18%, although officially, unemployment has remained at 1.0% since 1995.

ADB operations

Operational strategy: Inequitable economic growth and the need to assist growing numbers of poor people were major concerns in formulating ADB’s interim operational strategy for the country, the goal of which is reducing poverty and raising living standards by enhancing human development, supporting good governance and institutional strengthening, and promoting sustainable growth. ADB’s strategy for Azerbaijan consists of helping the Government improve the delivery of essential public goods and services to those in greatest need, and strengthen the environment for private investment and job creation. Policy dialogue: In 2001, ADB’s policy dialogue focused on Azerbaijan’s proposed national strategy for reducing poverty. Discussions with the Government and funding agencies focused on assisting 20,000 internally displaced persons, with $2.5 million financing from the Japan Fund for Poverty Reduction.

Loans and technical assistance: While no loans were approved in 2001, five technical assistance grants totaling $2.0 million were approved during the year, which will provide training in ADB policies and procedures, support macroeconomic policy development, facilitate development of a national program for poverty reduction, and prepare ADB’s first loan to Azerbaijan that will fund urban water supply and sanitation development.

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