IMF confirms Azerbaijan's economic leadership

The International Monetary Fund ( IMF ) updated forecasts for economic growth in Azerbaijan in 2011-2012, the IMF's report World Economic Outlook September 2011 posted on the organization's website said.

According to IMF updated forecasts, in late 2011, GDP growth will reach 0.2 percent in Azerbaijan (April forecast was at 2.8 percent). The IMF has lowered the forecast of growth of Azerbaijan's economy by 2.6 percent in 2011 in connection with the general slowdown in the global economy, the deterioration of the forecast of oil prices. Compared with spring of 2011, the economic growth in the world as a whole is characterized by much greater uncertainty. The global economy is suffering from a confluence of two adverse changes: slowdown of growth in countries with developed economies since the beginning of the year and a significant increase in uncertainty in the budget and finance, most notably seen in August.

The Fund notes that due to the high prices of the resources, the economies of the CIS countries continued to recover after the crisis, although growth rates are far from the pre-crisis. Private demand is still limited in the countries because of the instability of financial systems and reductions in leverage resources. As a result, economic growth rates in the CIS region in 2011 and 2012 will be at around 4.6 percent and 4.4 percent respectively (5.1% and 4.7% - June forecast.)

In most of the other energy-exporting economies, growth is also projected to moderate as energy prices recede somewhat in 2012. However, in Azerbaijan, maintenance-related disruptions in oil production will result in a sharp slowdown in growth in 2011-despite an acceleration in non-oil GDP growth. In Kazakhstan, the increase in oil production is expected to be lower than in previous years. Non-oil GDP growth is also expected to ease slightly from the strong rebound in 2010 in Kazakhstan as well as in Turkmenistan.

Energy-importing economies, on average, are expected to expand at roughly the same pace as in 2010. However, various idiosyncratic factors will lift growth in some of these economies: a recovery from last year's poor harvest in Armenia and a rebound in the Kyrgyz Republic from the contraction caused by previous civil unrest and political

turmoil. At the other end of the spectrum, Belarus is expected to experience a sharp slowdown as domestic demand contracts with the currency crisis and a reversal in capital flows.

The IMF classifies Uzbekistan, Georgia, Armenia, Tajikistan, Kyrgyzstan and Moldova, as countries with low income.

According to the IMF, in 2012, real GDP growth in Azerbaijan will be 7.1 percent, nearly twice exceeding the growth forecast in the global economy (4%) and the combined GDP of the CIS countries (4.4%). The growth in 2012 will enable to cover the "loss of rate", which the Fund forecasts for Azerbaijan in 2011 (real GDP growth at 0.2%). Moreover, Azerbaijan will be the only CIS country that will record real GDP growth in 2012.

Azerbaijan 's leadership is also clear in terms of economic development in its subgroup (South Caucasus). The real GDP growth in Georgia in 2012 will be 5.2 percent compared to 5.5 percent in 2011, Armenia - 4.3 percent compared to 4.6 percent, respectively.

According to IMF forecasts, in 2011 inflation in Azerbaijan will reach 9.3 percent, whereas earlier the Fund forecast inflation for the current year was at 10.3 percent. IMF forecasts inflation for 2012 at 10.3 percent (7.5 percent). However, in CIS, it will total 10.3 percent in 2011 and 8.7 percent in 2012.

"The record holder" on inflation in the CIS will be Belarus (41% in 2011 and 35.5% in 2012). In Georgia and Armenia, inflation is projected at 9.6% and 5% and 8.8% and 3.3% respectively.

The Fund estimates that in 2011, Azerbaijan will have a surplus of payment balance at 22.7 percent of GDP, in 2012 - 19.3 percent. With these data, the IMF confirmed Azerbaijan's regional leadership on the amount of the surplus of current account of payment balance. Moreover, the total surplus in the CIS region amounted to 4.6% and 2.9% of total GDP, and among energy-exporting countries in the CIS - 6% and 4.1% respectively.

In the subgroup of the South Caucasus countries, the payments balance surplus will be only in Azerbaijan: Georgia's current account deficit amounted to 10.8% of GDP in 2011 and 9.2% in 2012, Armenia - 11.7% and 10.7% of GDP respectively.

In its report, the IMF also noted Azerbaijan's leadership for the employment of the population. According to the IMF forecasts, like 2010 and 2011, the unemployment rate in 2012 will be only 0.7 percent.

Included in a subgroup of the South Caucasus countries along with Azerbaijan, Georgia and Armenia will lag behind upon this indicator. The unemployment rate in Georgia will be 16.3% in 2011 and 16% in 2012 and in Armenia - 7% each year. The number of Azerbaijan's population exceeds the total population of Georgia and Armenia almost 2 times.

The IMF notes that the growth in the Commonwealth of Independent States is not currently supported by strong commodity prices, but the risks have increased due to global recession.

The Fund notes the prospects of growth will significantly differ over regions:

• Growth in Russia is projected to reach about 4 percent during 2011-12. Prospects for oil prices, although still strong, are weaker than in the June. Moreover, capital flows-which fueled credit, private demand, and growth before the crisis-have yet to return because investors remain wary of the political uncertainty in the run-up to presidential elections and the uninviting business climate.

• In most of the other energy-exporting economies, growth is also projected to moderate as energy prices recede somewhat in 2012. However, in Azerbaijan, maintenance-related disruptions in oil production will result in a sharp slowdown n growth in 2011-despite an acceleration in non-oil GDP growth, reflecting a sizable supplementary budget approved in May-followed by a rebound next year. In general, growth of oil output is expected to decline over the medium term as existing fields approach their capacity. In Kazakhstan, the increase in oil production is expected to be lower than in previous years. Non-oil GDP growth is also expected to ease slightly from the strong rebound in 2010 in Kazakhstan as well as in Turkmenistan.

• Energy-importing economies, on average, are expected to expand at roughly the same pace as in 2010. However, various idiosyncratic factors will lift growth in some of these economies: a recovery from last year's poor harvest in Armenia and a rebound in the Kyrgyz Republic from the contraction caused by previous civil unrest and political turmoil. At the other end of the spectrum, Belarus is expected to experience a sharp slowdown as domestic demand contracts with the currency crisis and a reversal in capital flows.