Oil-rich Azerbaijan is making progress in its drive to diversify its sources of economic growth, but the desire to maintain stability could get in the way of tackling corruption, the European Bank for Reconstruction and Development (EBRD) resident official says.
Neil McKain told Reuters in an interview the non-oil sector was projected to grow by 9-10 percent in 2014, the same as in 2013. Overall economic growth was expected to slow down to 3.75 percent from 5.8 percent on the back of the fall in oil output.
"I think the government is on track with some of the right policies, but there is not as much progress as we want to see, when it comes to tackling corruption," McKain said.
"There are a lot of distortions created by the corruption that exists in the country. That has to be addressed from the top."
Commentators say official corruption is one of the biggest frustrations for people living in Azerbaijan, where strongman Ilham Aliyev has ruled since taking over from his father in 2003.
In its 2013 Corruption Perception Index, Transparency International ranked Azerbaijan 128 out of 177 countries. This put Azerbaijan lower than Egypt and Tunisia where street protests have overthrown previously entrenched governments.
But the government, which is criticised by opponents for its crackdown on dissent, put more emphasis on preserving political stability in the mainly Muslim country, sandwiched between Russia and Iran, that has been courted by the West because of its role as an alternative to Russia in supplying oil and gas to Europe.
"I think that the main focus of leadership of this country is stability. And if tackling corruption head on challenges the stability of the country, then the stability will win," McKain said.
Azerbaijan has been one of the world's fastest growing economies over the last decade. Luxury shops now sit outside the capital's old city walls and poverty has been reduced to single digits from over 50 percent ten years ago.
Growth has slowed in recent years on lower oil production and prices. Production stabilised last year, but started to fall again from the beginning of this year and is expected to be slightly lower than in 2013. Oil output fell by 2.4 pct in the first five months of this year compared with the same period in 2013.
McKain said the EBRD encouraged the government's efforts to reduce dependency on the oil and gas sector, which account for about 70 percent of the state budget's revenues.
"I think the government has become very serious about diversification. It will require a constant reform process, if the government is going to stay at this 10 percent growth in non-oil economy every year," he said.
McKain said fiscal strength and a low-level of integration into the regional economy as a non-energy exporter protected Azerbaijan from the currency troubles of other former Soviet states and neighbouring Turkey.
Azerbaijan's current account surplus stands at 15-16 percent of gross domestic product (GDP) and the central bank's currency reserves rose by almost 20 percent year-on-year to $15.1 billion as of June 1.
Total currency reserves, which include assets of the state oil fund, exceed $50 billion or 70 percent of its GDP.
The EBRD plans to allocate $300 million in credits in Azerbaijan in 2014.
(Reuters)
Bakudaily.az
