Azerbaijan's economic growth rate slows in January

Real GDP at factor cost rose by 0.8% year on year in January, according to preliminary figures.

Preliminary figures indicate that economic growth has slowed sharply, following year-on-year real GDP growth of 5.8% in 2013.

This is despite the fact that the GDP figures for January 2013 have been revised down, suggesting a weaker base period than previously thought.

Headline GDP growth was held back by the poor performance of the mining sector (including oil and gas), which declined by 5.9% year on year in January 2014. This is probably owing to repair work at the Central Azeri and West Azeri oil platforms, which are part of the giant Azeri-Chirag-Guneshli (ACG) oilfield, which is operated by BP and accounts for around 75% of total oil production. 

The launch of the West Chirag platform in early February this year will partially offset the impact of this repair work. 

Nevertheless, it is likely that overall oil output will be lower in year-on-year terms throughout 2014, and that the mining sector will make a negative contribution to the economy. 

In late January APA, an Azerbaijani news outlet, reported Gordon Birell, the BP president for Azerbaijan, Georgia and Turkey, as saying that repair work at the ACG field would lead to a fall in oil output in 2014 compared with last year.

The gradual decline in the mining sector is not unexpected. Oil production rose by just 0.2% last year, and we currently forecast that the oil sector will contract by an average of 1.5% year on year in 2014-18. 

Investment in the energy sector will remain high, partly in an effort to stabilise production at ACG. This should contribute to continued grow in the construction sector, which expanded by 18.9% year on year in January despite the high base period. 

However, the performance of the services and manufacturing sector is likely to be weaker in 2014 owing to the impact of slow growth in public spending on domestic demand. The government intends to increase public expenditure by just 1% in 2014. Initial figures from January would appear to support these expectations, with services expanding by 6.4% year on year (down from 7.2% in 2013), and manufacturing contracting by 1.8% over the same period.

(EIU)

ANN.Az