Finance minister says new macroeconomic situation formed in country [UPDATE]

By Azernews

By Amina Nazarli

The ongoing global economic crisis, the sharp decline in oil prices since 2014, and other external factors eventually contributed to creation of a qualitatively new macroeconomic situation in Azerbaijan.

Finance Minister Samir Sharifov made the remarks during a discussion on the draft state budget and the concept of socio-economic development for 2017 and the next three years in Baku on November 30.

The state budget was discussed at a joint meeting of the parliamentary committees on defense, security and fighting corruption, economic policy, industry and entrepreneurship, agrarian policy, public unions and religious organizations, natural resources, energy and ecology.

“Rate of real growth of Azerbaijan’s GDP is projected at 1 percent, while growth of the country’s non-oil GDP is projected at 2.5 percent in 2017,” Sharifov said.

He added that the country’s GDP is expected to reach 58.8 billion manats (official exchange rate on Nov. 30 is 1.7318 AZN/USD) in 2016, which is 2.8 percent less than in 2015.

Azerbaijan's GDP amounted to 49.2 billion manats in January-October 2016, which is 3.7 percent less than in the same period last year, according to the minister.

“Azerbaijan’s non-oil GDP in the reporting period decreased by 6.1 percent,” Sharifov said. “A 27.4-percent decrease in the construction sector, a high level dollarization in the country, decrease in the trade turnover, as well as the difficulties faced by Azerbaijan’s banking sector and deterioration of the quality of loan portfolio are the main reasons of the reduction of Azerbaijan’s GDP.”

The minister then spoke of assets of State Oil Fund of Azerbaijan noting that they should have decreased by $3.9 billion until the end of the year, but tight monetary policy made it possible to prevent the reduction of assets.

He also noted that revenues of SOFAZ are forecast at 8.37 billion manats in 2017, which is 4.89 billion manats (2.4 times) more compared to the forecast for 2016.

Expenditures of SOFAZ are forecast at 6.95 billion manats, which is 34.6 percent (3.685 billion manats) less than the volume expected in 2016, he said.

“As much as 87.8 percent of expenditures of SOFAZ (6.1 billion manats) account for transfers to Azerbaijan’s state budget, 11.8 percent (822 million manats) will be used to finance a number of infrastructure projects, and 29.3 million manats (0.4 percent) are provided for the education of Azerbaijani students abroad,” Sharifov added.

As of October 1, 2016, SOFAZ’s assets increased by 6.7 percent and amounted to $35.82 billion as compared to $33.57 billion in early 2016. During the nine months of 2016, revenues from implementation of oil and gas contracts amounted to 5.88 billion manats, including revenues from the sale of profit oil and gas amounted to 5.87 billion manats.

SOFAZ was established in 1999 with assets of $271 million. Based on SOFAZ’s regulations, its funds may be used for construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The main goals of the State Oil Fund are accumulation of resources and placement of the Fund’s assets abroad in order to minimize the negative effect on the economy, prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations, and supporting current social and economic processes in Azerbaijan.