Azerbaijan overview

Cityscape at night

In Azerbaijan we focus on:

Promoting market-driven economic diversification. The EBRD will support leading local corporates with direct financing while helping our partner banks to remain active in the corporate segment through MCFF. In the MSME sector the EBRD will place a special emphasis on the agribusiness sector, and will support local banks to develop their capacity to support agricultural and regional lending. Our continued support for regional roads will also help facilitate the development of a viable agricultural sector while facilitating integration of smaller communities.

Developing a sustainable financial sector to support private sector development. The EBRD will aim to strengthen financial intermediation to ensure efficient financing of the private sector, particularly SMEs and MSEs, including in the regions.We will promote high standards of corporate governance and risk management, which should contribute to increased competition, setting new standards and opening new markets for banks, and will support consolidation in the banking sector through potential equity investments. The EBRD will extend its co-operation with existing partner banks and assist in the development and promotion of new financial instruments to target improved access to finance for women-owned and women-run businesses, and will aim to promote energy efficiency investment projects through local banks via the Caucasus Energy Efficiency Programme.To develop local capital markets, we will seek to bring corporate (non-FI) issuers to the corporate bond market and expand the institutional and retail investor base.

Improving governance and the business environment. In order to support the authorities’ goals of promoting competition and improving the business environment, the EBRD will prioritise engagement with private and public sector clients who can demonstrate commitment to high standards of corporate governance and transparency and who have a commitment to improving management practices. In parallel, we will work closely with the Government of Azerbaijan to deepen institutional and regulatory reform. Drawing on the lessons of hydrocarbons and financial sectors, the EBRD will strive to create a more favourable investment climate in the real sector by promoting improvements in the legislative framework, enhancing competition and reducing the incentives for corruption. In order for these measures to be successful, opening new channels for constructive policy dialogue with key government agencies will be crucial. The EBRD will also continue to pursue investments in energy projects that improve energy security, create new generating capacity, stimulate competition, diversify energy sources, increase efficiency, and create wider and larger markets through regional integration.

The EBRD’s latest Azerbaijan strategy was adopted on 30 April 2014

EBRD forecast for Azerbaijan’s Real GDP Growth in 2017 -0.5%

EBRD forecast for Azerbaijan's Real GDP Growth in 2018 2.0%

The pace of economic recession in Azerbaijan has slowed on the back of the moderate recovery in the oil price and macroeconomic stabilization policies. GDP contraction moderated to 0.6 per cent year-on-year in the first nine months of 2017. The drop in capital investment has levelled off in the first eight months of 2017. Inflation has picked up to 13.9 per cent year-on-year in the first nine months of 2017. Azerbaijan’s current account moved from a deficit of 3.6 per cent of GDP in 2016 to a small surplus in the first half of 2017, enabled by the oil price recovery. Macroeconomic policies have remained relatively tight to curb inflation, defuse foreign exchange pressures and safeguard liquidity buffers. Completion of landmark gas infrastructure projects is expected to provide stimulus to growth from 2018 onwards, although downside risks remain, associated mainly with the dependence on the resource sector and banking sector challenges. The conflict in the Nagorno-Karabakh region presents a risk to the growth outlook. We forecast Azerbaijan’s economy to contract by 0.5 per cent in 2017 followed by 2.0 per cent growth in 2018.

Azerbaijan in the EBRD’s 2017-18 Transition Report