Azerbaijan’s economy in 2022: Taking proactive approach

Azerbaijan’s economy has ended the first quarter of this year on a positive note with GDP growing by 6.8%, the non-oil sector showing an increase of 10.3%, and the non-oil industry rising by 18.1%.

As can be seen, the course towards the development of the non-oil sector is bearing fruit. Industrial parks established in the country, benefits and subsidies for entrepreneurs, investment promotion documents and other measures have helped stimulate business development in the country.

For example, the role of industrial parks in the economy is growing every year. Investments in industrial parks have already reached 23.8% of total investments in the non-oil sector. For all the time, their residents have manufactured products for 6.3 billion manats, and exported products for 2 billion manats.

The growth rates of production and exports are increasing rapidly. One of the brightest examples is the Sumgayit Chemical Industrial Park. Last year, the residents of the industrial park exported products worth more than $700 million - the same amount as they have exported over the past 10 years!

In general, last year the export of products from industrial parks increased by 138%, and production - by 76%. It is noteworthy that this trend is observed not only in industrial parks, but also the export of other industrial products is increasing.

In January-March 2022, foreign trade turnover increased by more than 60%, and exports doubled. Although the rise in energy prices also affects the situation, non-oil exports also show high growth rates - by 45%.

Taking proactive approach

Last year, Azerbaijan’s GDP growth was projected at 3.4%, and amounted to 5.6%. State budget revenues in the first quarter of this year turned out to be 6.3% (418 million manats) more than forecasts and exceeded 7 billion manats. Revenues from the State Tax Service exceeded forecasts by 23.8%, from the State Customs Committee - by 23.7%.

Actual economic growth is ahead of forecasts due to many factors. For example, they include elimination of grey economy, and a favorable business and investment environment. All this contributes to the growth of registered enterprises, tax and customs revenues, and the inflow of investments.

State budget revenues higher than forecasts? This means that there are surpluses that can be directed to new projects, transferred to an increase in reserves. The finances from the State Oil Fund are becoming less needed, which allows increasing the financial cushion, and in the current tense conditions (failures in production and logistics chains around the world, high inflation, etc.), every saved manat is very important.

Economic growth ahead of expectations? This means that entrepreneurs feel comfortable, prepared strategies, signed decrees and orders are effective, they don’t remain on paper, but are put into practice. According to the results of the first quarter, 99% of budget funds were disbursed as another good indicator.

According to the results of the first quarter of this year, Azerbaijan has formed a record (for the first three months of the year) volume of nominal GDP - 30 billion manats. It is also considered a record for non-oil GDP - 15 billion manats.

Industry accounts for more than half of GDP. At the same time, the value of production and services rendered in this area amounted to 20.6 billion manats, which is 3.9% more than a year earlier. The main growth was provided by the non-oil sector - by 18.1% over the year, while the oil industry grew by 1.1%. It is gratifying that the private sector accounts for the biggest share of the industrial production and services (87.5%).

Against the background of an increase in household income (by 18.9%) and consumer demand (by 4.4%), production in the processing industry is growing in the republic. Moreover, according to the State Committee on Statistics, growth was recorded in all areas, except for the production of beverages (some types of alcoholic beverages), textile products, footwear and leather products, installation and repair of machinery and equipment.

Active agenda: Focus on Karabakh

The beginning of the year in Azerbaijan was rich in economic events. The list of significant events includes an agreement with Iran on the Zangazur corridor, an agreement with Masdar and ACWA Power for the construction of solar and wind power plants, a declaration on allied interaction with Russia, and others.

In addition, President Ilham Aliyev visited Ganja, Aghdam, Tartar and Agjabadi regions, not counting visits to Ukraine, Russia and Belgium. During visits to the regions, dozens of facilities were opened. The work on the restoration of Karabakh can be highlighted in this context.

For almost a year and a half, huge work has been done in the territories liberated from occupation. Fuzuli International Airport, hotels, residential buildings and administrative buildings, new roads, restored cultural and architectural monuments - the speed and quality of the work carried out stunned the world.

The restoration of Karabakh is proceeding at an accelerated pace. Some 2.2 billion manats have been allocated for this year, of which about 16% of the funds have already been disbursed. Last year, 2.2 billion manats were also allocated for these purposes.

The number enterprises established in the Karabakh region amounted to 146 enterprises in 2021 and 32 in 2022. In the East Zangazur economic region there are 44 and 7 established enterprises, respectively. Today, there are 5,704 enterprises and 80,574 individual entrepreneurs in both economic regions. Now these two economic regions account for about 2-3% (6% in the case of individual entrepreneurs) of all enterprises registered in Azerbaijan. Not the highest figure, but given that the growth rate of opening new enterprises exceeds that of some areas, it is safe to assume that the situation will change very soon.

Renewables occupy a special place in the development of Karabakh. The potential of the country's alternative energy sources exceeds 26,000 MW, and Karabakh is responsible for more than 9,000 MW of this volume. That is, slightly more than a third of the potential of renewable energy sources in the country are located in the territories liberated from occupation.

It is no coincidence that a few days ago, during his speech at a meeting following the results of the first quarter of 2022, President Ilham Aliyev noted the importance of attracting private capital, both foreign and local, to this area.

Today, against the backdrop of existing global problems, the Azerbaijani economy demonstrates high stability and the ability to adapt flexibly to external changes. High growth rates and outstripping pace are a clear example of this.

Azad Hasanli, analyst