05/25/2010, 00.00
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Economic crisis could trigger recession in Azerbaijan

The International Monetary Fund issues the dire warning. The country’s economy is almost entirely dependent on energy exports. Without diversification, it could plunge in recession next year. International assistance is crucial.
Baku (AsiaNews/Agencies) – The economic crisis in the West has had a negative impact on Azerbaijan’s oil sector. Lower demand for oil is expected to cut forecast economic growth this year by two thirds unless other sectors of the economy expand. However, to do this, the country needs foreign assistance, the International Monetary Fund (IMF) said in a report dated 13 May.

According to the IMF, an estimated 10 per cent decline in the oil sector will cause Azerbaijan’s 2010 economic growth to shrink to 2.7 per cent, a drop of more than threefold compared with 2009, when the economy expanded at a 9.3 per cent rate, most of it fuelled by the energy sector. The non-energy sector grew 3 per cent last year, down from 16 per cent in 2008.

To encourage an upward swing, the IMF called on Azeri authorities to stimulate the private sector “through trade facilitation, tax and customs modernization, and reducing monopolies.” The government, however, appears to be moving in the opposition direction.

At a 15 April cabinet meeting, President Aliyev maintained that Azerbaijan, despite a global economic recession, was still “demonstrating stable growth.” At the same time, his government announced an increase in public sector wages, without specifying the amount.

Arif Valiyev, chairman of the State Statistics Committee, backed the president, saying, “GDP growth during the first four months [of 2010] was 5 percent year-to-year”. He added that foreign investments rose by 67 per cent in the first third of 2010.

Experts note however that the government has not supplied any detailed information about its claims. Instead, it is turning to international financial institutions.

Speaking on 19 May to the executive directors of the European Bank for Reconstruction and Development, Economic Development Minister Shahin Mustafayev asked for the Bank “to play an active role in support of the private sector in Azerbaijan.” Nine of the London-based bank's 23 executive directors are expected to visit Azerbaijan on 31 May.

Analysts say that in the past the country’s ruling elites have tried to consolidate their hold on the economy at the expense of the private sector. However, Rasim Huseynov, deputy chairman of the non-governmental Centre for Economic Research, told Eurasianet that the government has promoted telecommunications, tourism and small and medium businesses to balance the energy sector, but non-oil exports “still make up only 5 percent of Azerbaijan’s overall exports”.

Without more growth in other sectors, Azerbaijan may experience a recession starting in 2011. Already, many Azerbaijanis have a hard time making ends meet.

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