WB has published a report with positive outlook on Azerbaijan

11:54 - 31.03.2021


March 31, Fineko/abc.az. Azerbaijan’s economic recovery is expected to be gradual, with production returning to pre-Covid-19 levels only by end 2022, says World Bank's newly-published report “Data, Digitalization, and Governance” on the Europe and Central Asia region.

"The early launch of Azerbaijan’s vaccination initiative and significantly higher public post-conflict reconstruction spending suggest that the recovery may materialize faster than previously anticipated. In 2021, an acceleration of domestic demand will support economic growth, but this will depend on improved health situation and increased public spending. Higher oil prices are forecast to narrow fiscal deficit and help current account return to surplus,” the report says.

The WB considers that in the period after 2021, without major structural reforms, the pace of the economic revival is likely to be moderate owing to a protracted recovery in oil production and anticipated fiscal tightening (amid rising fiscal pressures).

“Country’s projected inflation is expected to increase due to rising prices, and demand is also beginning to recover. The government phases out the measures aimed at supporting the financial sector, and some banks are likely to experience a deterioration of capital and profitability ratios,” the WB experts believe.

In their opinion, the downside risks to this forecast will remain substantial in the medium-term prospect: “The existing oil market equilibrium is fragile and largely depends on the OPEC+ agreements. In addition, the evolution of the pandemic is still uncertain and will depend on the speed of the vaccine rollout. Finally, regional geopolitical risks will remain elevated in the foreseeable future.”

SOFAZ’s significant reserves - over 100% of GDP at end-2020 - will help shield the economy from these risks.

"The longer the pandemic duration, the deeper and broader the impact, especially on employment and wages in the service sector. Azerbaijan's recently announced vision for national development until 2030 sets out a renewed long-term commitment to addressing systemic macroeconomic, structural and governance challenges. Addressing these challenges can open up new non-carbon sources for economic growth and achieving sustainable and inclusive development," the report says.

 

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