Azerbaijan Country Risk Report Q4 2018
Azerbaijan's economy began its gradual recovery in 2017, and we expect this to continue over the coming quarters due to an expansion in natural gas produc-tion, coupled with a pick up in investment in the non-oil sector due to the government's improved ability to spend. We are therefore forecasting real GDP growth to rise to 1.7% in 2018 (compared with 0.1% in 2017) and 3.3% in 2019.
However, the government's plan to significantly diversify the economy will not bear significant fruit due to a 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.
Despite relatively low oil prices, public finances will remain stable on the back of sovereign wealth fund reserves of over 92.0% of GDP.le monetary and exchange rate policies and a competitive business environment, we remain bullish on the long-term economic prospects for the UK.Key Risks
A major downside risk stems from another oil price crash, resulting in deteriorating public finances and further cuts in capital expenditure. This would halt Azerbaijan's economic recovery and likely cause another recession.
The banking sector remains weak, and continued weakness could weigh significantly on credit growth and economic activity.
Escalating tensions with neighbouring Armenia can quickly result in an all-out war between the countries.
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