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Azerbaijan Country Risk Report Q2 2018

Azerbaijan Country Risk Report Q2 2018

Executive Summary

Core Views

Azerbaijan's economic recovery following the recession in 2016 will be sluggish in the coming years due to subdued oil prices and a banking sector still under significant pressure from the manat's devaluation in 2015.
The government's plan to diversify the economy will not bear signifi - cant fruit due to the poor business environment and lack of structural reform momentum. Long-term growth will, thus, remain tepid relative to historic trends, averaging 4.2% over our forecast period to 2027, as Azerbaijan's oil production is in long-term decline.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Slow Recovery As Headwinds Not Fully Dissipated
The ongoing recovery in global oil prices is likely to bode well for the Azerbaijani economy, which is slowly recovering from the deep
recession experienced in 2016. That said, continued weakness in the banking sector and tight monetary policy are likely to cap the pace
of recovery. We are, therefore, maintaining our forecast for real GDP growth to come in at 0.3% in 2017 and 1.2% in 2018 (from -3.1%
in 2016) GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Chapter 2: 10-Year Forecast
The Azerbaijani Economy To 2027
Weak Growth Up To 2027
Over our 10-year forecast period to 2027, we believe Azerbaijan's economy will remain on a weak growth trajectory. Undoubtedly,
energy exports will continue to be the key driver underpinning growth in the years ahead. In addition, we expect rising incomes and
consumption to help keep growth buoyed during our forecast horizon TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Short-Term Political Outlook To Remain Weak
We maintain our view that Azerbaijan's short-term political outlook will likely remain poor over the coming months; we are keeping our
short-term political risk score unchanged at 62.9 out of 100, ranking it 110th out of 203 countries globally. The country's poor score is
due to continued risks from social instability and security/external threats, but the strong policy continuity score lends some support TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Everything Hinges On Nagorno-Karabakh
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
TABLE: TERRORISM THREAT
TABLE: POLITICAL VIOLENCE RISK
TABLE: MAJOR CONFLICT FLASH POINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAYS RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5:BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, %
y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, %
y-o-y

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