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Azerbaijan Country Risk Report Q4 2019

Azerbaijan Country Risk Report Q4 2019

The outlook for the Azerbaijani economy will improve gradually in the coming quarters, against the backdrop of rising energy prices and a brighter outlook for household consumption.

At Fitch Solutions, we forecast real GDP growth in Azerbaijan to come in at 2.5% in 2019 and 2.9% the following year, above Focus Economics' estimates of 2.1% and 2.4% growth for both years.

That said, the country's improving business environment is unlikely to compensate for key structural impediments to growth, namely its lackluster attempts to diversify its economy away from the energy sector.

Baku's hosting of the UEFA Europa League final has once again increased international media scrutiny on Azerbaijan's human-rights record, as well as the coun-try's ongoing border dispute with neighbouring Armenia, potentially discouraging investment and tourism.

Azerbaijan's ability to continue financing new infrastructure projects and prestige events looks set to wane, amidst a challenging economic and fiscal outlook for the country.

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.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Growth Profile Set To Gradually Improve In 2019 And 2020
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
TABLE: GDP GROWTH FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
10-Year Forecast
The Azerbaijani Economy To 2028
Relatively Weak Growth Up To 2028
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
'Vanity Events' To Damage Azerbaijan's Image In The West
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Everything Hinges On Nagorno-Karabakh
Azerbaijan Country Risk Q4 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report is solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsOperational Risk
TABLE: OPERATIONAL RISK
Labour Costs
TABLE: REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE
Legal Environment
TABLE: BUREAUCRATIC PROCEDURES
TABLE: BUREAUCRATIC BARRIERS
Global Macro Outlook
Trade Tensions And Slowing Momentum Point To Weaker Growth Outlook, Higher Risks
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: AZERBAIJAN – MACROECONOMIC DATA & FORECASTS

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