ANNUAL REPORT JUNE 2010
FEDERATION OF EURO-ASIAN STOCK EXCHANGES
BAKU STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic Performance
Azerbaijan has experienced the repercussions
of the global downturn through weaker oil
prices and heightened risk aversion towards
emerging markets. In the initial part of our
forecast period, commercial banks will
continue to face difficulties raising capital
abroad, and access to credit for domestic
companies and households will be reduced.
However, a return to global economic growth
in 2010, along with higher oil prices compared
with 2009, will increase budget revenue, and
the government will also be able to draw on
the State Oil Fund of the Republic of
Azerbaijan (SOFAZ) to help to fund social
spending and infrastructure projects.
Although Azerbaijan has felt the effects of the
global economic downturn, with real GDP
growth estimated to have slowed from 10.8%
in 2008, the effects have been much less
severe than in other countries in the east
European region. Azerbaijan recorded real
GDP growth of 8.3% year on year in January-
October 2009, compared with expansion of
12.7% in the year-earlier period, when the
global economic downturn had already begun.
Higher oil prices in 2010, compared with 2009,
and higher external demand for oil will have a
positive impact on the outlook for the
economy, which is highly dependent on the
energy sector. Real GDP growth is forecast to
rise to 9.5% in 2010. Lower oil prices in 2011
will weigh on the economic outlook, so that
real GDP is forecast to slow moderately, to
9.2%.
Average annual consumer price inflation
reached 20.8% in 2008, the fastest rate of
growth in prices for more than a decade, but is
estimated to have decelerated to around 1.7%
in 2009. Weaker domestic demand growth and
lower international oil prices have reduced
export revenue inflows, lowering inflationary
pressures. These factors have been partly
offset by increased social spending, as the
authorities have sought to alleviate the impact
of rising unemployment. Higher fuel and
commodity prices–combined with the
continuation of higher government spending,
increased capital inflows and a rebound in
domestic demand–will contribute to a pick-up
in the pace of price rises in 2010, to a forecast
average of 6.6%. Inflation will fall to 6.4% in
2011 as global energy prices fall moderately.
* The Economist Intelligence Unit Limited, December 2009
The manat depreciated slightly against the US
dollar in August-October 2008, owing to
disruptions to oil exports. The authorities
appear to have been supporting the currency,
as in the first nine months of 2009 the manat
was stable against the US dollar, at around
Manat0.8:US$1, even though oil prices were
lower than in 2008. In 2010-11 oil and gas
export volumes are expected to rise compared
with 2009, but global energy prices will remain
considerably lower than in 2008. Nonetheless,
a modest increase in export revenue is
expected over the forecast period. Spending
on imports will pick up in 2010-11 as investors
increase capital outlays, albeit at a slower rate
than in 2008. In addition, refurbishment of
infrastructure will require imports of machinery
and equipment, although expenditure on
Key Information Contacts
National Bank www.nba.az
State Committee for Securities www.scs.gov.az
Ministry of Finance www.maliyye.gov.az
National Depository Center www.mdm.az
Ministry of Economic Development www.economy.gov.az
PAGE 58
imported consumer goods will be lower than in
recent years, owing to reduced access to
credit. Services debits for the hydrocarbons
sector, on activities such as consultancy and
geological services, will moderate, as foreign
investors seek to reduce costs in response to
the impact on firm's revenue of the global
economic recession in 2009. This will lead to a
narrowing of the deficits on the services and
income accounts compared with 2008. After
falling to an estimated US$7.2bn in 2009
(equal to 13.4% of GDP), the current-account
surplus will rise to around US$12.3bn in 2010
(19.3% of GDP). A moderate drop in global
energy prices in 2011 will weigh on the trade
surplus, resulting in a drop of the current-
account surplus to around 15.3% of GDP.*