CESD: IMF’s Forecasts are Unrealistic

CESD: IMF’s Forecasts are Unrealistic

The IMF’s more upbeat prognosis of 2012 economic growth was met with skepticism as CESD economists said the fall in oil industry would continue to hamper the country’s growth. International Monetary Fund (IMF) has increased much the forecast of economic growth rate on Azerbaijan stated in its specified World Economic Outlook (WEO), published on October, 09, 2012. The IMF expects that this year Azerbaijan’s GDP will grow by 3.9% (versus initial forecast of 3.1% made in early 2012) and in 2013 by 3.1% (1.9%). The forecast for 2017 was left unchanged – 3.1% of economic growth.

For comparison, as a whole, growth on the CIS area is expected to reach 4% in 2012 and 4.1% in 2013.  IMF also, reduced inflation forecast for 2012 from 5.6% to 3%. The forecast for 2013 was decreased from 6.1% to 6% and for 2017 from 6% to 5%. At that, inflation for the end of 2012 is forecasted in Azerbaijan at the level of 6.5% versus initial 5.6% and for the end of 2013 at 5.5%.

CESD- Center for Economic and Social Development experts state that IMF forecasts do not reflect the reality much: “It is hard to explain why IMF increased economic growth rate for Azerbaijan in spite of the fact that both Government of Azerbaijan and Asian Development Bank (ADB) decreased their forecasts for 2012. Beside that, the State Statistical Committee reports that production in non-oil sector grew by 7.9%, while production in oil sector dropped 5.4% in the first 8 months of 2012. GDP increased only 1,3 % in this period. The CESD survey results show that GDP increased 0,7 % in the first eight month of 2012 since growth in non-oil sector was 6,1 %. If GDP increased only officially 1,3 % in the first 8 months of 2012, then it is almost impossible to reach 3,9 %  growth forecasted by IMF”.

It is reminded, here, Government of Azerbaijan (GoA) has adjusted its previous official forecast of 5.7 % GDP growth in 2012 to 2.5 % right away after CESD announced its survey results on Monday this week. The report came from Azerbaijani Cabinet Ministers on September, 26, 2012. In fact, GoA adjustment was based on CESD survey findings announced couple days ago. Hence, GoA failed to achieve economic growth forecast for 2012.  ADB adjusted GDP Growth Rate for Azerbaijan from 4,1 % to 3,0 % according to updated Asian Development Outlook. In the first half of 2012, GDP grew by 1.5% on an annual basis, up from 0.9% in the same period of 2011 but still anemic, primarily reflecting inefficient oil well operation in Azerbaijan.

The CESD also forecasts 5.2 % growth in the non-oil sector while the Azerbaijan government still targets 9.0 % growth for 2012. CESD reports that the inflation rate in Azerbaijan is expected to be 7.5 %, which scheduled 6.0 % by the Government of Azerbaijan earlier in the year.

CESD experts also mention that non-oil sector contributed only 160 % of budget revenues, 57 % of GDP in Azerbaijan. More than 92 % of total export is oil and oil products. Figures show than non-oil sector contribution to the economy in Azerbaijan still is not observable and it cannot provide visible growth in this sphere. Therefore, IMF forecasts for 2012 can not reflect the reality.

It is reminded here, that IMF forecast for last year was not obsessed.

© CESD, 2012

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