ADB expects budget deficit to narrow to 0.7% of GDP 

The fiscal policy of Azerbaijan is expected to remain expansionary in 2021 as the budget deficit widens further to equal 4.2% of GDP with continued heavy social spending. It will narrow to 0.7% in 2022 as revenue recovers and a fiscal rule on spending is reactivated, Report informs, with reference to the Asian Development Outlook (ADO) 2021: Financing a Green and Inclusive Recovery.

The document says that the tax collections will rise with the end of tax holidays and measures to formalize the shadow economy: “Budget revenue is forecast to grow to 34.5% of GDP in 2021 before slipping to 33.7% in 2022 with smaller transfers from SOFAZ. Expenditure is forecast to reach 38.7% of GDP in 2021 and then decline to 34.7% in 2022 as fiscal control resumes. The 2021 budget for pandemic response equals 2.8% of GDP and includes free medical care for COVID-19 victims, universal free vaccination, temporary salary increases for medical workers, compensation for state-owned enterprises, and support for especially vulnerable individuals and firms. The government will continue to assist entrepreneurship in 2021 through credit guarantees and subsidies to private firms. With the anticipated resumption of economic growth, public debt is projected to decline to 21.1% of GDP at the end of 2021 and 20.0% a year later.”