The World Bank (WB) has upgraded its outlook of Azerbaijan's GDP growth in 2021 to 2.8% compared to the January forecast of 1.9%, in 2022 - to 3.9% from 4.5%,
According to the WB Europe and Central Asia Economic Update, Spring 2021: Data, Digitalization, and Governance, the growth of the Azerbaijani economy is projected at 3.4% in 2023.
“Similar to other ECA subregions, the number of daily new cases in the South Caucasus surged again in the fourth quarter of 2020. Georgia suffered the most severe outbreak, with per capita cases rising at roughly three times the peak rate in Armenia and Azerbaijan. However, Armenia faces the highest cumulative deaths per capita in the South Caucasus—it is also the only country that did not enter into a second lockdown amid the late-2020 resurgence,” the report reads.
The WB notes that vaccine rollouts have been hampered in the South Caucasus due to procurement delays, but Azerbaijan initiated its immunization campaign in February amid the delivery of Sinovac vaccines.
“Although widespread progress has been slow, agreements with the United Kingdom’s pharmaceutical company AstraZeneca and with Russia for Sputnik V could help jumpstart vaccinations later this year. High vaccine reluctance, particularly in Georgia, could hinder broader vaccination efforts.
After suffering the sharpest collapse among the ECA subregions in 2020 amid armed conflict and high COVID-19 infection and fatality rates, growth in the South Caucasus subregion is projected to rise to 3.1 percent in 2021 and to accelerate to 4.2 percent in 2022.
The recovery at the start of 2021 remains muted, however, reflecting subdued domestic demand due to the pandemic, as well as an escalation in domestic political tensions (Armenia) and continued weakness in transport and tourism (Georgia).
Monetary policy also became tighter, with Armenia and Georgia hiking policy rates. In all, GDP per capita is expected to remain 7.0 percent below pre-pandemic forecasts by 2022. The outlook over the forecast horizon is predicated on the shocks related to the pandemic and conflict dissipating, and on a recovery in tourism alongside improving consumer and business confidence. Activity is expected to expand in Azerbaijan over the forecast horizon as oil prices stabilize and the economy benefits from investment and reconstruction spending. The ceasefire agreement between Armenia and Azerbaijan is expected to help alleviate geopolitical tensions in the region, although risks to stability remain,” the WB report says.