President Ilham Aliyev will face a more challenging third term, as slower economic growth will increase the pressure for economic reform and raise the risk of social unrest, the Economic Intelligence Unit (EIU) said in a report.
The EIU also said:
• Tensions with Armenia will remain high, owing to the long-running dispute over Nagorny Karabakh. Talks aimed at resolving the dispute have resumed, but a resolution is unlikely in the forecast period.
• Relations with Turkey will remain strong over the forecast period. Azerbaijan will aim to maintain cordial relations with Russia, which will continue to be a key player in regional security.
• Public spending will be tighter in 2014-15 as the government seeks to manage the impact of slower growth in revenue from the oil sector.
• Diversification of the economy away from oil will proceed slowly, as a result of which the budget deficit, excluding transfers from the State Oil Fund of the Republic of Azerbaijan (SOFAZ), will remain large.
• The economy is forecast to grow at an annual average of 3.5% in 2014-18, much more slowly than during the boom period of 2000-08.
• Oil output is forecast to rise modestly in 2014-15, to a peak of around 900,000 barrels/day, and to decline gradually from 2016. Risks are oriented to the downside, as stabilisation of production will depend on strong investment in the giant Azeri-Chirag-Guneshli oilfield.
• The operating environment for non-oil companies will be difficult, owing to pervasive corruption and the presence of large formal and informal monopolies. Diversification will become an increasingly pressing policy priority.
• The manat will continue to be stable in nominal terms against the US dollar during 2014-18. High oil prices and a rise in foreign capital inflows will provide support to export revenue and to the currency.
• Annual average inflation will remain in single digits in 2014-18 as weaker domestic demand limits inflationary pressures. However, continuing large inflows of oil-related foreign exchange will prevent more rapid disinflation.
• The current account should stay in surplus throughout the forecast period, but will decline as a share of GDP. Imports of geological and construction services will rise in the final years of the forecast period as preparations for Shah Deniz II pick up speed.
Bakudaily.az
Follow us !
