Growth halved to 2.8% in 2014 in Azerbaijan from 5.8% a year earlier as oil output declined. Higher public spending in 2015 is projected to lift growth marginally to 3.0% before it reverts in 2016 to 2.8%, as the expansion of public investment slows. Inflation was subdued in 2014 but will likely return following currency devaluation, while the current account surplus remains sizable. Government spending needs to rely less on oil revenue.
|Selected Economic Indicators (%) - Azerbaijan||2015||2016|
|Current Account Balance (share of GDP)||12.0||13.4|
Source: ADB estimates.
Economic expansion in Azerbaijan slowed to 2.8% in 2014 from 5.8% in 2013, mainly because the petroleum sector contracted by 2.9%. Oil production declined by 3.7%, reversing a slight pickup in 2013, as one of the main oil wells at the principal oil field was shut for maintenance. Largely dependent on public investment, the economy outside the oil sector expanded by 7.0%, down from 10.0% in 2013 as spending on infrastructure was constrained.
Despite a continuing slowdown in the petroleum sector, growth is projected to recover slightly to 3.0% in 2015 before reverting to 2.8% in 2016 as public investment moderates. Industry is expected to contract by 2.5% in 2015, as lower oil prices may curtail oil output, and then contract again in 2016, but only by 1.6%, as recovering prices revive oil output. Planned investment in infrastructure should offset declines in the oil sector, aiding non-oil growth in 2015 and 2016. However, growth could be less if declining oil revenue constrains budget outlays more than anticipated.
Excerpted from the Asian Development Outlook 2015.