ADB: Azerbaijan needs to expand economic diversification

Azerbaijan and Kazakhstan saw their economies contract significantly due to COVID-19. Although both are resource-rich, upper-middle-income countries, economic shocks like the COVID-19 pandemic underline the need to expand economic diversification to make their economies less dependent on one export sector to become more resilient, Report informs referring to the Asian Development Bank (ADB).

“Azerbaijan’s large oil and gas reserves are a major contributor to its economy. Exports from the country contracted by 36.6% in 2020, the data show. On the demand side, in 2020, imports declined by 11.1%, compared with import growth of 3.5% in 2019. Azerbaijan’s economy as a whole reversed 2.5% growth in 2019 to contract by 4.3% in 2020, according to the data. Growth is forecast to resume in 2021 and accelerate in 2022 as the pandemic eases and global demand for energy recovers,” the Asian Development Outlook (ADO) 2021 forecasts.

The gas-rich Central and West Asian country, Turkmenistan, experienced a similarly severe economic downturn in 2020. ADO 2021 noted a dramatic decline in external demand and prices for hydrocarbons, which provide more than 80% of exports and 30% of Gross Domestic Product (GDP) meant exports were down by 24.2% in 2020, according to Basic Statistics 2021. This is in marked contrast to the previous year when exports had been growing by 8.2%. Neighboring Kazakhstan, another major oil producer, saw its exports dive by 19.4% during 2020.

“The coronavirus disease (COVID-19) pandemic has had a significant negative impact on global trade and supply chains, with many vulnerable economies in low-income countries being disproportionately affected. Although developing Asia’s trade recovered somewhat in the latter half of 2020, mainly due to the People’s Republic of China (PRC), the rebound was less pronounced in other economies in the region,” the ADB noted in its report.

In general, the bank indicates the extent of trade disruption in many countries in developing Asia in 2020, at the height of the pandemic. Particularly badly hit were the oil and gas exporting countries, which had to deal with low prices and plummeting demand for hydrocarbons globally as industrial activity, trade, and international travel tanked.