EBRD significantly improves growth forecast for Azerbaijan's economy

The European Bank for Reconstruction and Development (EBRD) has improved the forecast for economic growth in Azerbaijan in 2022, Report informs, citing the EBRD Regional Economic Outlook for March.

This year Azerbaijan's GDP growth rate is expected to be at 5%. This indicator exceeds the previous (November) forecast by 1.8 percentage points.

In 2023, Azerbaijan's GDP growth is projected at 2.5%.

The EBRD, assessing the impact of the Russian-Ukrainian crisis on the countries of the Eastern Europe and Caucasus (EEC) region, notes that Azerbaijan’s economy could benefit from increased oil prices, and the move by European countries to alternative suppliers of oil and gas, thus boosting GDP growth in 2022.

“Beyond the short term, the economic implications of possible post-conflict scenarios are difficult to assess at present but could be serious for countries in this region. Even if the conflict lessens, the persistent risk of another major escalation is likely to continue to have a devastating impact on the investment climate and financing conditions,” EBRD analysts noted.

“In other EEC countries, trade disruptions are likely and high energy and grain prices will keep inflation at elevated levels. Armenia and Georgia also have high export shares to Russia (25-30 percent), which would likely be affected by the expected downturn of the sanctioned Russian economy. Georgia may additionally suffer from a slowdown in tourism from Russia and Ukraine, strongly affecting an already battered hospitality industry. Armenia might also be hurt by a fall in remittances from Russia. Increasing arrivals of Russians who seek refuge in Armenia and Georgia might compensate this to some extent.”

“Moldova’s fragile economy and constrained institutional capacity mean it is struggling to cope with the influx of Ukrainian refugees. It is likely that this will seriously disrupt the reform agenda of the new government,” EBRD noted.