The European Bank for Reconstruction and Development (EBRD) has downgraded the forecast for Azerbaijan’s GDP growth in 2021 to 2 percent from 2.5 percent, Report informs referring to the EBRD’s June Regional Economic Prospects report.
“The gradual recovery of Azerbaijan’s economy is being driven by sectors other than oil and gas. After being hit by a triple shock—the Covid-19 pandemic, a slump in oil prices and the flare up of the conflict over Nagorno-Karabakh—Azerbaijan’s GDP declined by 4.3 percent in 2020. A strong contraction in the oil and gas sector of 7.2 percent was balanced by a softer decline in the rest of the economy, which was helped by the government’s extensive support package. Lower oil revenues on the back of the price slump and the production decline under the OPEC+ deal turned external and fiscal surpluses to deficits,” reads the report.
“However, Azerbaijan’s public debt remained low despite the ensuing gaps as funding needs were met domestically by drawing upon the large assets of the State Oil Fund of Azerbaijan (SOFAZ). Nonhydrocarbon sectors started to recover in 2021, posting 4.5 percent year-on-year growth in the first five months. However, the overall GDP growth, estimated at 0.8 percent year-on-year in the same period, continues to be weighed down by lower oil and gas production. Rising demand for and price of oil, supported by an expected gradual increase of oil quotas in the coming months, will strengthen the overall economic performance in the second half of 2021. The economy is forecast to grow by 2 percent in 2021 and 2.5 percent in 2022,” the EBRD noted.
The economies of Eastern Europe and the Caucasus (Azerbaijan, Armenia, Belarus, Georgia, Moldova and Ukraine) are expected to grow 2.8 percent in 2021 and 3 percent in 2022. For the current year, this is 0.2 percentage points better than in the September report, and for 2022 it is 1.1 percentage points worse.