The impact of the global economic downturn was much less severe on Azerbaijan than on other countries in the region. Real GDP expanded by 9.3% in 2009, the fastest rate in eastern Europe. However, growth slowed in 2010, to 5%, as output growth from oil production slowed to 0.9%, from a 13.5% expansion in 2009. The slowdown in real GDP growth in 2010 marked a shift in the underlying economic dynamics. In recent years, the oil sector had been the main driver of the economy; however, in 2010 the oil sector expanded by 1.8%, whereas the non-oil sector grew by 7.9%. We forecast that oil prices will average US$108.5/barrel in 2011, up from US$79.6/b in 2010. Oil production will continue to expand much more slowly over the forecast period than in recent years, and this will act as a significant drag on economic activity. As such, we forecast that real GDP growth will decelerate further in 2011, to 3.5%.
Compared with the historical period, growth will remain sluggish in 2012. Although oil prices are forecast to fall to US$94.5/b in 2012, oil production will remain fairly stable, and this should be sufficient to support budget and export revenue, which are heavily reliant on profit from the oil sector. Although the expansion of hydrocarbons output will be much slower than in 2005-09, it will increase steadily. The Chirag oilfield is scheduled to come on stream in late 2013, which will provide a boost to oil production from 2014. In the final years of the forecast period, growth will also be supported by increasing investment in the hydrocarbons sector as preparations for the second phase of the Shah Deniz project, which should come on stream in 2016-17, are undertaken. The continuing development of the hydrocarbons sector will have spillover effects in services sectors such as transport, communications, and wholesale and retail trade.
Economic growth | ||||||
% | 2010a | 2011b | 2012b | 2013b | 2014b | 2015b |
GDP | 5.0c | 3.5 | 3.3 | 4.6 | 5.1 | 5.8 |
Private consumption | 4.8 | 3.5 | 3.3 | 4.0 | 4.0 | 4.5 |
Government consumption | 5.9 | 3.0 | 3.0 | 5.0 | 4.5 | 4.0 |
Gross fixed investment | 6.0 | 4.0 | 7.0 | 9.0 | 9.0 | 10.0 |
Exports of goods & services | 14.5 | 5.0 | 5.0 | 5.0 | 6.0 | 7.0 |
Imports of goods & services | 1.5 | 2.5 | 3.0 | 3.5 | 4.5 | 5.0 |
Domestic demand | 2.5 | 3.5 | 3.9 | 5.6 | 6.1 | 5.4 |
Agriculture | -2.2 | 3.0 | 3.2 | 3.5 | 3.8 | 3.8 |
Industry | 2.6 | 3.0 | 3.9 | 4.2 | 4.4 | 4.8 |
Services | 10.1 | 4.4 | 2.5 | 5.3 | 6.4 | 7.5 |
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual. |
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