Azerbaijan economy: Growth holds steady

(Economist Intelligence Unit) -- Real GDP at factor cost grew by 5.7% in January-November, unchanged from January-October,  according to initial figures from the State Statistics Committee (SSC).The SSC only provides year-to-date growth rates for GDP by factor cost. However, we calculate that the year-on-year growth rate fell to 5.1% in November, from 8.2% in October. The slowdown in the rate of growth was driven by a further weakening in the construction sector, which expanded by 23.5% year on year in January-November, compared with 25.2% in January-October,implying a contraction in November compared with the equivalent month of 2012. We expect the pace of growth in construction to continue to weaken gradually in 2014 as the sector is still performing above its historical average of around 20% growth year on year.By contrast, industrial production continued to strengthen in November owing to rising oil output. Oil production in November stood at 3.4m tonnes, according to preliminary SSC data, down by 3.9% month on month, but up by 3.8% in year-on-year terms. The pace of growth in oil production was down significantly from October, when output leapt by 11% year on year. November's oil output figures are in line with our expectations of an annual rise in production of 0.8% compared with 2012. The extractive industry as a whole expanded by 1% in January-November, compared with 0.8% in January-October. With investment also rising, we now expect the sector to expand by 1.1% year on year, compared with 0.8% previously. We continue to forecast that the oil industry will decline by 0.8% in 2014; although oil production is expected to rise by 2.5% in that year, this will be offset by a 3.4% fall in prices.The services sector continued to expand faster than the economy as a whole in January-November, recording growth of 6.7%,unchanged from January-October. We expect the pace of growth in services to fall back in 2014, owing to fiscal tightening, as expenditure is forecast to grow at below the rate of inflation.

This will constrain the contribution of the education and health subsectors to growth. Weaker performance in the oil sector is also likely to have knock-on effects on services-in particular, on the transport and warehousing subsector.

ANN.Az