Azerbaijan – new economic growth models in focus

By: Gulgiz Dadashova

Azerbaijan, the largest economy of the South Caucasus, is interested in the experience of the Asian countries in developing potential mechanisms and economic growth models with a view of adapting its own to those most advanced.

Finance Minister Samir Sharifov made the remark speaking at the workshop “Rethinking Growth Potential and Growth Models” held in Baku as part of the 48th meeting of the ADB Board of Governors on May 3.

“The Asian countries’ economies have been rapidly growing for the last ten years. The average annual growth is six percent. Moreover, different countries use different growth models. For example, these resources are the driving force of economic development in such countries as Azerbaijan, that is, countries rich in natural resources.

“However, the external and internal situations have changed. So, Asian countries, including Azerbaijan, must reconsider their growth models and try to adapt them to new conditions or find new ways of economic growth,” the minister said.

With a population of over 9 million, Azerbaijan relies on hydrocarbons for more than 90 percent of exports. Meanwhile 65 percent of its state budget is formed on the petrodollars.

The country has recorded high economic growth mainly thanks to large and growing oil and gas exports, but some non-export sectors also featured double-digit growth, including construction, banking, and real estate.

Sharifov emphasized that Azerbaijan’s economy is rapidly growing, adding that this has been observed for the last ten years. “In a short period of time, the country’s GDP has tripled. This was stipulated by a favorable external situation, primarily, energy prices on the world markets. As a result, Azerbaijan’s growing revenues were widely used for economic revival. As a result, the annual growth of Azerbaijan’s economy has hit about ten percent for the last ten years.”

Azerbaijan for the short period has turned from a low-income country to a middle-income country. This success was achieved generally as a result of economic transformation, Sharifov said.

“We achieved reduction of the poverty level in Azerbaijan. For the short period, poverty level in Azerbaijan reduced approximately by 10 times. If in due time poverty level in the country made 50 percent, now it is lower than 5 percent. Now in Azerbaijan the income of the population is stable. And it, certainly, can be connected with growth of welfare of the country in general. These indicators were achieved at the expense of investments in physical and social infrastructure. The correct use of economic recovery has positive impact on society,” the minister.

He further noted that those countries rich in natural resources, are subjected to external shocks, such as energy prices fall and the potential depletion of natural resources.

“This may limit our growth in the future,” he said. “So, the government is considering various growth models. “Azerbaijan 2020: A Look into the Future” strategy envisages the diversification of the economy in all sectors as well as the development of the non-oil sector. The growth of the non-oil sector has been the country’s main driving mechanism. In terms of growth it outstripped even the oil sector. However, the non-oil sector increased due to state investments. The government used funds from oil revenues to support the non-oil sector. But we must find a more optimal way of development.”

The economy of Azerbaijan increased by almost 3 percent in the first three months of 2015 despite the fact that oil prices plummeted at the end of last year. The non-oil sector has increased by 7 percent.

The minister added that the government plans to change its economic growth model within ten years.

“It is obvious that this growth will be inclusive. It will be based on the development of the social sector, which has always been a priority for Azerbaijan.”

“The growth of the country’s economy will be based on the diversification of the economy and the reduction of our dependence on the oil and gas sector. This does not mean that we will close all oil and gas projects. We will continue the development of this sector and develop important projects in this field.”

Sharifov, however, stressed that Azerbaijan does not see the need for external borrowing.

“While reducing income, some countries may resort to draw in on foreign loans as a temporary step. I think that this is not so important for Azerbaijan. Our government first placed state bonds on the foreign markets in 2014. Earlier, all external borrowing, drawn by the country, was associated with any important projects. Azerbaijan has never drawn foreign loans for trade.”

SOURCE: Azer News