CESD: ADB’s Forecasts are Unrealistic

CESD: ADB’s Forecasts are Unrealistic

The Asian Development Bank’s more upbeat projection of 2015 economic growth was met with skepticism as CESD economists said which the decline of crude oil price would continue to hamper the country’s growth. ADB expects that the GDP growth in Azerbaijan will be equal to 3.0 percent in 2015 and 2.8 percent in 2016. ADB Asian Development Outlook, published this week says that “despite a continuing slowdown in the petroleum sector, growth is projected to recover slightly to 3.0 percent in 2015 before reverting to 2.8 percent in 2016 as public investment moderates. Industry is expected to contract by 2.5 percent in 2015, as lower oil prices may curtail oil output, and then contract again in 2016, but only by 1.6 percent, as recovering prices revive oil output. Planned investment in infrastructure should offset declines in the oil sector, aiding non-oil growth in 2015 and 2016. However, growth could be less if declining oil revenue constrains budget outlays more than anticipated”.

The Bank reports that subsidized lending to farmers should help agriculture grow by 4.0 percent in 2015 and 5.0 percent in 2016. Services are forecast to grow by 8.0 percent in 2015 and 6.5 percent in 2016, driven largely by trade and tourism as Azerbaijan hosts the First European Games in 2015 and the Baku European Grand Prix, a Formula 1 race, in 2016. Large infrastructure projects, including road rehabilitation and the reconstruction of water supply, sanitation, and energy facilities, should boost construction in 2015 and 2016.

In 2014 growth halved to 2.8 percent from 5.8 percent a year earlier as oil output declined, according to the ADB report. Inflation is expected at 6.0 percent in 2015 and 5.5 percent in 2016. In 2014 inflation rate was at 1.4 percent in Azerbaijan, the bank said.

CESD experts state that ADB forecasts do not reflect the reality much: “It is hard to explain why ADB forecasts more economic growth rate for Azerbaijan in 2015 (3.0 % growth) compared to 2014 (2.8 % growth) in spite of the fact that even Government of Azerbaijan decreased their forecasts for this year.

It should be reminded here that GDP was 7.1 billion manat in the first 2 months of 2015. According to the State Statistics Committee of Azerbaijan, GDP increased by 4.2% compared to the same period of previous year. However, the committee have not reported how GDP growth was calculated. The point is that GDP was 8.5 billion manat in the first 2 months of 2014 (Fore reference see, the committee’s 2014 report: http://www.stat.gov.az/rss/az/view.php?newsid=2194 ). Comparison of GDP of the first 2 months of 2015 with the same period in previous year (7.1 billion manat / 8.5 billion manat x 100 %) GDP declined by 16.5 % in the indicated period.

CESD experts also mention that 95 % of total export is oil and oil products. Low oil price in the world market declines value of country’s total export. Meanwile, although 34.0 % devaluation of local currency ADB surprisingly forecasts only 6.0 % inflation rate for 2015. Therefore, ADB forecasts for 2015 can not reflect the reality.

© CESD, 2015

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