Azerbaijan overview

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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 EBRS 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 2015 3.0%

EBRD forecast for Azerbaijan's Real GDP Growth in 2016 2.5%

In Azerbaijan, growth slowed from 5.8 per cent in 2013 to 2.8 per cent in 2014, affected by the decline in oil output. In 2014, a negative real growth contribution of agriculture and mining was offset by the positive contribution from construction, trade, transport, storage and communications. In January-September of 2015, the economy expanded by 3.7 per cent year-on-year, with non-oil GDP expanding by 6.4 per cent. Amid low oil prices, Azerbaijan’s foreign currency reserves (in convertible currencies) decreased from US$ 13.2 billion in November 2014 to approximately US$ 5.3 billion in August 2015. Nevertheless, Azerbaijan’s liquidity position is strong: assets of the State Oil Fund and the central bank’s foreign exchange reserves collectively represented approximately 56 per cent of the 2014 nominal GDP and 26 months of imports at the end of the first half of 2015. By end-2014, public and publicly guaranteed debt was low at around 15 per cent of GDP. In February 2015, after almost two decades of stable exchange rate, the central bank devalued the manat against the US dollar by 25 per cent. This helped to contain pressure on the fiscal and external balance, but led to balance sheet concerns in the banking sector. We upgrade our Azerbaijan GDP growth forecast to 3 per cent in 2015 and 2.5 per cent in 2016.

Azerbaijan in the EBRD’s 2015-16 Transition Report

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