Gazprombank: Azerbaijan’s economic growth in 2022 may reach 5.1%

Economic growth in Azerbaijan may amount to 5.1% at year end, well above Fitch’s 3.6% expectation, said Gulnara Khaidarshina, deputy head of research in Russia’s Gazprombank, chief CIS economist, Report informs.

“Thanks to fiscal stimulus, benign hydrocarbon prices and increased supplies through the TAP gas pipeline launched in November 2020, Azerbaijan's economic growth in 2021 recovered to 5.6% after a 4.3% decline in 2020, exceeding our expectations (+5.1%) and Fitch's forecast (+4.9%).

In 9M22, Azerbaijan's economy also grew by 5.6% YoY (vs. 4.8% YoY in 9M21), fueled not only by high hydrocarbon prices, but also recovery in the non-oil sector, where growth reached double-digit figures in 9M22 (10.1% YoY). In the short term, economic growth will still be supported by high oil prices, the realization of plans to increase gas deliveries to Europe via the new TAP pipeline, recovery in the non-oil sector, and new projects in Karabakh. That said, the OPEC+ decision to cut production by 2 mln bpd in November will constrain growth,” she noted.

“As an oil and gas exporter, Azerbaijan is one of the key beneficiaries of high hydrocarbon prices. Moreover, its strategic geographical position between Europe and China alongside its developed air, rail, pipeline and maritime infrastructure are turning the country into a new pivotal logistics hub amid the ongoing restructuring of international supply chains in Eurasia.

In addition, amid an inflow of tourists from Russia and the absence of quarantine restrictions, we are seeing recovery of economic activity in the non-oil sector of Azerbaijan's economy. In the medium term, diversification of the latter should also be driven by new projects in Karabakh, which include the construction of new transportation and social infrastructure, industrial parks and renewable energy facilities. All these factors create prerequisites for an upgrade of Azerbaijan's rating outlook and potentially an increase of the rating to the investment grade level,” she added.