Outlook for 2011-15

• The Economist Intelligence Unit expects the incumbent president, Ilham Aliyev, to face a more testing second term in office, as slower economic growth will raise the risk of social protests.
• Competition will intensify between the EU and Russia for Azerbaijani energy resources during the forecast period. Azerbaijan will focus on playing off these competing interests against each other to secure political advantage.
• The economy will grow at an annual average of 4.3% in 2011-15, down from an average of 16.4% in 2006-10. Slower expansion in oil production in the coming years will act as a considerable drag on growth.
• Annual average inflation rose to 5.7% in 2010, from 1.5% in 2009. Annual average inflation will stay in single digits in 2011-15, but consumer demand growth will exert inflationary pressures in the later part of the forecast period.
• The manat will remain largely stable in nominal terms against the US dollar in 2011. The manat will assume an appreciating trend against the US dollar from 2012 onwards as investor risk appetite resumes and capital inflows rise.
• The current account will remain firmly in surplus in 2011-15, averaging 19.4% of GDP. High oil exports will continue to be the main driver of the substantial trade surplus.

Monthly review

• The Public Chamber umbrella opposition group held protests against the government in the capital, Baku, on April 2nd and April 17th. The protests were swiftly put down by the authorities.
• The plan of the de facto government in Nagorny Karabakh to open an airport near the region's capital, Stepankert (Khankendi), has led to an increase in tensions between Azerbaijan and Armenia.
• The state-owned energy company, Azerenergy, plans to construct ten new hydro plants in Azerbaijan by the end of 2011. Improvements to the country's infrastructure are necessary after years of underinvestment.
• The state budget recorded a surplus of Manat681m (US$850m) in the first quarter of 2011. The government may revise its state budget forecast in May, owing to higher than expected oil prices in the first quarter.
• Real GDP expanded by 1.6% year on year in the first quarter of 2011. The non-oil sector was the main driver of growth.
• The current-account surplus rose to just over US$15bn in 2010, from US$10.2bn in 2009. A sharp rise in export revenue, to US$26.5bn-owing to higher global commodity prices-was the main factor driving the increase.