3-year forecast on Azerbaijan’s current account balance revealed

This year, Azerbaijan’s current account surplus is expected to be 6.9 percent of gross domestic product (GDP), according to the WB Europe and Central Asia Economic Update, Report informs.

This figure is projected at 6.4 percent next year and 4.5 percent in 2023, according to the document.

“Favorable terms of trade pushed the current-account balance from a 0.5 percent of over the medium term amid declining fiscal spending. Investment is forecast to GDP deficit at end-2020 to an 8 percent surplus in the first half of 2021. While financial-account outflows continued, CBA reserves were stable at $6.5 billion, and the assets of the State Oil Fund (SOFAZ) rose by 2 percent y/y to $44.1 billion (104 percent of GDP) in the first half of 2021,” the WB said.

“Easing currency pressure since March 2020 helped the CBA maintain the exchange rate at 1.7 Azerbaijani manat per US dollar. The consolidated budget balance posted a surplus of 7.1 percent of GDP in the first seven months of 2021, as the economic recovery increased fiscal revenue, while some crisis-response measures expired and budget execution slowed,” reads the report.

According to the Ministry of Finance, in 2021, Azerbaijan’s current account balance is projected to have a deficit of 3.1 percent of GDP, or about $1.4 billion.

“The current and next year’s trade surplus won’t fully cover the current account deficit. Although the current account deficit is projected this year and the next one, according to various oil price scenarios, a surplus is expected in the medium term, which will strengthen stability in the foreign exchange market. This, in turn, will strengthen stability in the foreign exchange market. Thus, the reduction of the deficit in the balance of services in the coming years will enhance the formation of a surplus in the current account balance.

In the context of the reduction of negative effects in the post-pandemic period, along with the main recovery trends in the country’s economy, the level of export diversification is expected to increase. As a result of measures taken to minimize dependence on imports by increasing domestic production, the volume of goods exported from the country is expected to increase. Against the background of the implementation of a number of important measures to promote the production and export of competitive non-oil products, a steady increase in the foreign trade balance is expected in the medium term,” the ministry said.