The trade surplus rose to almost US$3.6bn in the first quarter, up from US$3.35bn in the year-earlier period. Exports expanded by 20.7% year on year, to reach US$5.4bn. Mineral products, which are overwhelmingly comprised of oil products, continued to comprise the largest proportion of total exports, accounting for almost 95% of the total. Oil exports were worth US$4.7bn and natural gas products were worth US$152.2m. The value of oil exports was boosted by higher global oil prices in the first quarter. We forecast that oil prices will gradually fall in the second half of 2011 as the impact of slowing consumption growth and reduced investor risk appetite feed through. Nonetheless, we forecast oil prices to average US$108.5/b in 2011, up significantly from US$79.6/b in 2010, and this will provide a boost to export revenue.

Imports rose by 63.3% year on year in the first quarter, substantially faster than exports. However, the value of imports continues to be dwarfed by exports: imports totalled almost US$1.9bn in the first quarter. Machinery (up by 88% year on year, to US$604.8m), transport equipment (up by 96.5%, to US$280.9m) and base metals (up by 135%, to US$269.8m) were the largest components of imports. The increase in demand for such products has probably been driven by faster real growth in the non-oil sector in recent months.

In the first quarter Italy was the largest destination for Azerbaijani exports, absorbing US$1.8bn of exports, around one-third of the total. Italy primarily imports oil and oil products from Azerbaijan. The second-largest destination was France, which imported goods worth US$815m. The largest sources of imports in value terms were Russia and Turkey, with US$352.9m and US$236.8m, respectively. Azerbaijan's trade turnover with the Commonwealth of Independent States (CIS) rose to US$1.47bn from US$801m in the year-earlier period. Azerbaijan exported goods worth US$856.9m to the CIS in the first quarter, and imported goods worth US$614m. The resurgence in exports to CIS countries (exports increased by 103.8% year on year in the first quarter) can be explained by the improvement in domestic demand in these countries as the impact of the global recession of 2009 continues to fade.

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