Gross domestic product (GDP) in Azerbaijan grew by 5% in the first half of 2013, outperforming the Asian Development Outlook (ADO) 2013 forecast in April and well above the 1.5% recorded during the first half of 2012. Petroleum now provides less than half of GDP, and other sectors of the economy grew by 10.9%, mainly reflecting gains in services and construction, with the latter growing by 35.5% as investment surged. Moreover, agriculture expanded by 4.9%, and further growth is expected from the government’s funding of the state company Agroleasing and of a national program to support entrepreneurship. Oil production declined by 1.6% in the first half of 2013. Weighing continued public investment spending and an expected modest recovery in oil production, however, the ADO 2013 Update raises the growth forecast for 2013 from 3.1% to 4.0% while maintaining the 2014 growth forecast at 4.8%.
|Selected Economic Indicators (%) - Azerbaijan||2013||2014|
|ADO 2013||Update||ADO 2013||Update|
|Current Account Balance (share of GDP)||13.0||10.0||17.0||17.0|
Sources: Asian Development Outlook (ADO) 2013 Update; ADB estimates.
Annual inflation averaged only 2.0% during the first half of 2013, albeit with the inflation rate slowly rising over the period, reflecting a 2.8% rise in food prices and further relaxation of monetary policy in February. However, robust credit growth and growing domestic demand, reflecting higher public spending (including a 10% salary increase for civil servants), are likely to exacerbate inflationary pressures. Thus, the ADO 2013 Update maintains inflation forecasts of 6.0% for 2013 and 7.0% for 2014.
The trade surplus weakened during the first half of 2013, as lower petroleum exports outweighed a rise in exports other than oil, and as higher domestic demand boosted imports by nearly 17% during January-May, particularly for food and other consumables. As these trends should continue for the rest of the year, the ADO 2013 Update lowers the 2013 current account surplus projection from 13.0% of GDP to 10.0% while maintaining the forecast of 17.0% for 2014.
Source: ADB. 2013. Asian Development Outlook 2013 Update. Manila.