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Annual Report 2002 : East and Central Asia

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Azerbaijan

Economic performance

Real GDP growth in Azerbaijan was 10.6% in 2002, up from 9.9% in 2001. While oil sector-related construction accounted for much GDP growth, output growth was buoyant in all sectors, reaching 4.2% in industry and 6.4% in agriculture.

The average nominal wage rose by 20.3%. Inflation, as measured by the consumer price index (CPI), was 2.8%. The average annual exchange rate depreciated by 4.2%.

The FDI inflow increased from $900 million in 2001 to $1,567 million in 2002, reflecting the launch of several major investment projects in the oil sector. This fully financed the external current account deficit, which widened from 1.3% of GDP in 2001 to 12.5% in 2002 due to a sharp increase in imports related to oil development.

Macroeconomic policies remained fairly tight. Although the general government deficit increased slightly from 2.1% of GDP in 2001 to 2.2% in 2002, it was less than the target deficit of 4.0%. The refinance rate of the National Bank of Azerbaijan was lowered from 10% to 7% per annum, but remained positive in real terms. Broad money increased by 16%.

ADB operations

Operational strategy: ADB’s interim operational strategy, approved in 2000, continued to guide ADB’s activities in 2002 and was the basis for the CSP Update approved in 2002. Given the high level of poverty incidence, ADB proposes to improve the delivery of essential public goods and services to those in greatest need, and strengthen the environment for private investment and job creation. The goal to reduce poverty and raise living standards will be addressed through human development, good governance and institutional strengthening, and broad-based growth.

Policy dialogue: In 2002, ADB’s policy dialogue focused on helping formulate a national program for poverty reduction. In particular, ADB’s advice helped improve the quality of the outputs of five sector working groups for refugees and internally displaced persons, rural development, poverty monitoring, regional development, and fiscal policy. Discussions were also held with the Government, nongovernment organizations (NGOs), and other funding agencies to find ways to assist refugees and internally displaced persons in Azerbaijan.

Loans, technical assistance, and grants: No loans were approved in 2002. A grant of $2.5 million and a technical assistance of $700,000 were approved in 2002 (see tables 24, 25, and 35 in the Statistical Annex).

Project implementation: Since joining ADB in 1999, Azerbaijan has not borrowed from ADB. There have been delays in the implementation of the technical assistance due to a lack of familiarity with ADB procedures. ADB is addressing this issue by inviting government officials to seminars and workshops on ADB procedures, and supporting capacity building at key government agencies.

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