High oil prices boost current account in Azerbaijan

(Economist Intelligence Unit) -- The current account recorded a surplus of US$3.05bn in the second quarter.

The surplus was lower than in the first quarter of the year, when inflows on the current account stood at US$3.33bn, but significantly larger than the US$2.5bn surplus recorded in April-June 2013. 

The value of oil and gas exports rose by 7.3% in the second quarter of 2014 compared with January-March, despite a slight fall in oil production. This is in line with a quarter-on-quarter rise in average spot prices of just above 7% over this period, and also reflects the improved performance of the gas sector.

The value of merchandise exports is likely to weaken in the second half of the year as global oil prices are now falling. In addition, EIU expects oil output to contract by around 1.5% over the year as a whole.

In contrast, merchandise imports totalled US$2.5bn in April-June, down by over 12% year on year for the second quarter in a row. EIU expects household expenditure growth to weaken in 2014, which will weigh on consumer goods imports. 

However, preliminary trade data suggest that the biggest declines have come in imports of plastics, machinery and transport equipment, suggesting that there may have been a slowdown in spending by businesses.

However, overall foreign direct investment remains strong, at US$3.9bn in the first half of 2014. This was the highest-ever half-year, reflecting the high levels of investment in the Shah Deniz II oilfield, as well as spending by BP to maintain production at the Azeri-Chirag-Guneshli field.

Bakudaily.Az