In the background of the Russian invasion of Ukraine, European Union (EU) agreed to ban the overwhelming majority of Russian oil imports. Since the beginning of the invasion, the West decided to make Moscow pay economically for its aggression. Nevertheless, the decision aimed at the energy sector was quite challenging since the bloc relies on Russia for 25% of its oil and 40% of its natural gas.
Repercussions of the western sanctions on the Russian economy increasingly arise that negatively affect the total economic structure. National GDP shrank by 4.3% in the first quarter of the current year. As forecasted by the Russian Central Bank following the exposure to sanctions, a 7 percent reduction in the GDP could be expected in the third quarter. Russian ruble lost its value by 7 percent against the dollar in less than a month which even resulted in an inevitable devaluation in the official exchange rate.
COVID-19 had a considerable negative impact on the economy of Azerbaijan, with SMEs being one of the major victims from the economic perspective. Economic sectors were affected to a different extent by the pandemic and lockdown measures. As a result of lockdown measures, many SMEs closed their operations with their employers not being paid or left without pay. Although the government provided essential support to small and medium-sized businesses, the share of closed businesses was high. Over two years since the beginning of the pandemic, a measures toward the improvement of the business environment was done. The share of operating and newly created SMEs increased along with legislative incentives adopted for their development.
After the global pandemic, rising global demand, as well as the impact of geopolitical and military tensions, have led to a significant rise in the prices of major energy carriers in recent years. In the context of this pandemic, the recession in the country's economy in 2020 was replaced by the process of rapid economic recovery in 2021. The significant increase in oil prices in Azerbaijan had a positive effect on the nominal amount of GDP, although the increase in nominal GDP was mainly due to the oil sector, the real growth was possible almost due to non-oil sectors. The economic situation for the past period of the current year, the medium-term socio-economic forecast indicators, and the performance of budget revenues more than expected made it necessary to revise the state budget for 2022…
The article clarifies the directions in which the Southern Gas Corridor (SGC) can be expanded and gas can be transported to how many countries. For the expansion of the SGC, countries such as Bulgaria, Poland, Hungary, the Czech Republic, and Romania are studied in this paper. The issue of reducing Europe's 40% dependence on Russian gas and Europe's search for alternative energy sources and the expansion of the Southern Gas Corridor, one of the largest gas export projects to Europe, are on the agenda. In addition, the threat of several European countries - Poland, Bulgaria, Finland, the Netherlands, and Denmark - refused to pay for Russian gas in rubles, and as a result, the supply of gas is cut off.
In a way towards a productive peace-building process, discussing the situation in South Caucasus and deepening economic cooperation between the EU and both countries, on May 23 President of the European Council Charles Michel hosted the President of Azerbaijan: Ilham Aliyev and Prime Minister of Armenia: Nikol Pashinyan. Following the 6 April meeting, which is called by the President Ilham Aliyev as a starting point in the normalization of relations between Armenia and Azerbaijan, the content of the recent meeting is once more characterized by its promising and necessary provisions that will serve the interests of Azerbaijan and development of the region more broadly.
CESD – the Center for Economic and Social Development – concluded its macro-economic survey results for the first four months of 2022. According to the State Statistic Committee of Azerbaijan, Gross Domestic Product (GDP) increased by 7.2 % in January-April 2022 compared with the same period of previous year: The CESD’s figure for the same period was 6.5 %.
Following Russia's decision to restrict natural gas exports to Poland and Bulgaria, energy security has become a priority in the European Union. Although the ancient continent is trying to increase gas imports from alternative sources, Gazprom is still trying to maintain its dominance in Europe for some time. Meanwhile, Azerbaijan continues to increase natural gas production. In the first quarter of this year, Azerbaijan produced 11.8 billion cubic meters of natural gas. 3.5 billion cubic meters of gas were produced from ACG, 6.4 billion cubic meters from Shah Deniz, and 1.9 billion cubic meters from SOCAR. During that period, gas exports amounted to 5.9 billion cubic meters. 2.2 billion cubic meters of gas were exported to Turkey, 2.6 billion cubic meters to Europe, and 1.1 billion cubic meters to Georgia. More than 4 billion cubic meters of gas were transported to Turkey via TANAP during this period.
While the economic instability of the international system resurrected debates about the future of the World Order, diving against the current and studying in a destabilizing pandemic context a bilateralism touted for its durability and solidity seemed academically attractive. Thus, the purpose of this research paper is to verify whether COVID-19 is causing fatal economic disruptions among the iron alliances, or if on the contrary one is witnessing an "unnatural" strengthening. By reconciling empirical data (reports of the Central Bank, the OSCE, press articles) and academic papers, this study analyzes the surprising Turkish-Azeri economic consolidation before questioning its still-perceptible limits in the short and long term. This work concludes that through the neorealist prism, Ankara and Baku managed to transform Covidian negativity into an element of strategic economic cooperation aimed at repairing financial loopholes on a national scale...
Attracting foreign direct investment is now more important for Azerbaijan than ever before. Against the background of global uncertainty, the development of the non-oil sector and the diversification of the economy have become even more priority. On the other hand, there has been a decline in oil production in recent years, and even though high oil prices, the country's revenue from energy sales is lower than compared to the period before 2014...
By using statistical descriptive analysis, this article analyzes how the isolation of Russia from the international trade and finance system, as a result of the Western sanctions, will affect the Russian trade turnover and what type of future challenges and opportunities it may provide for the non-oil export base of Azerbaijan. In terms of the opportunities, Azerbaijan can further focus on its main non-oil export goods such as agricultural and chemical industrial products to capture an additional share in the semi-abandoned Russian market, along with considering possible competition pressure coming from the other non-western Russian trade partners. Re-exporting opportunities currently are limited in scale and have a risk of facing international sanctions and criticism.
The Western Alliance has approved a new package of sanctions against Russia. The most notable of the sanctions is the suspension of coal exports from Russia. What does this mean for Russia, and how can the European Union compensate for this ban? Yesterday, the European Commission posted a decision on sanctions on its website, which means that the ban will come into force. This means that from today, European companies will not be able to conclude contracts to buy coal from Russia. The contracts signed in the previous period must be completed by August...
For a continuation of the discussion on the situation in South Caucasus and deepening cooperation between the EU and both countries, on April 6 President of the European Council Charles Michel held a meeting with the President of Azerbaijan Ilham Aliyev and Prime Minister of Armenia Nikol Pashinyan where EU’s commitment in overcoming tension and the peace-building process was further expressed. The EU reiterated the necessity to adhere to the provisions of 09/10 November 2020 trilateral statement...
The ongoing climate change and recent geopolitical tensions could spark a global food crisis with simultaneous disruptions to supply-chain systems that drive up the economic shock waves throughout the world. Following the conflict between Russia and Ukraine, the upsurge in the price of agricultural commodities and broken supply chains are undeniably vivid. Both countries are exporters of vital commodities such as wheat, oil, corn, sunflower oil and corn, and disturbances to production affect the import-reliant countries.
The Russia-Ukraine war has revealed energy reliance between the European Union and Russia as an issue. In addition to the dependence of the European Union (EU) on Russia, particularly in the sphere of energy, it did not alleviate but rather aggravated, Europe's and Russia's security worries about each other. All happenings raise this question: Can the European Union eliminate its dependence on Russian gas? Is it possible? If possible, for how long can this dependence be eliminated?
The past three decades of independence demonstrate that Russia remains a strategically economic and political partner, and multidirectional relations between two parties historically were of crucial importance. In the year 2021, total trade turnover between Russia and Azerbaijan accounted for 2.295 bln USD with a 12% upsurge recovering to pre-pandemic levels. Russia ranked as the 3hd largest trade partner of Azerbaijan in 2021 following Italy and Turkey and the share of trade with Russia alone made up 8.83% of the total in this period.
The year 2020 posed an unprecedented challenge to the World economy with the outbreak of the Covid-19 pandemic shrinking the global GDP by 6,7 % and bringing worldwide severe economic repercussions. Economic recovery is in continuation process in which the non-hydrocarbon sector acts as the main driver with a strong contribution of the oil and gas sector as well coupled with the rising demand for, and price of, oil that can further strengthen overall economic performance, however risks in the scenario are vivid.
The US, Canada and key European countries, including Germany, have agreed to remove “selected Russian banks” from the Swift payment system. According to the World Trade Organization, Russia's total exports in 2020 amounted to $ 332.2 billion, while imports amounted to $ 240.4 billion. In 2020, Russia's foreign trade surplus decreased from $ 179.5 billion to $ 91.8 billion due to the pandemic.
According to the World Bank, in 2019, Russia's exports amounted to $ 426.7 billion and imports to $ 247.1 billion. Russia's main trading partners are China, the Netherlands, Germany, Belarus, and Turkey. China, Germany, the United States, and Italy are the main partners in imports.
It should be noted that SWIFT is an international financial structure that allows money to be sent from one part of the world to another without borders. It means the Global Interbank Financial Telecommunication Association. Founded in 1973 and headquartered in Brussels, the system covers 200 countries, with a total of 11,000 financial institutions and banks. More than 40 million messages are sent every day through this system, and trillions of dollars are transferred between companies or governments.
Removal from SWIFT will seriously affect the international payments of Russian companies. Because in this case, Russian companies will face serious difficulties in non-cash payments. This will create difficulties for Russia, especially in the export of strategic products.
Given that the shares of Russia's leading companies are indexed on stock exchanges, SWIFT does not bode well for future entrepreneurs in the north. For comparison, Iran's withdrawal from the system in 2012 meant a loss of one-third of our trade turnover for our southern neighbor. In this regard, the withdrawal from SWIFT will lead to a reduction in Russia's foreign trade turnover, which will lead to a decline in shares of companies.
Economic estimations are that Russian economy will face strict crisis early 2023 if sanctions are kept in the agenda. Russian economy is not in the position to fight with sanctions even for short-term period.
Removing Russia from SWIFT system has already impacted on Russian currency market. The Russian ruble has depreciated sharply against the backdrop of new Western sanctions. The Russian currency has depreciated against the US dollar to the level of 1 dollar 105 rubles. Apparently, if the war continues and sanctions expand, it will not be the last stop for the ruble.
On the other hand, the growing demand for the dollar in Russia will create a shortage of foreign currency. There are already long queues in front of almost all Russian banks. Citizens are trying to take their money from banks. This could have serious negative consequences for Russia's banking sector.
Russia's financial sector has reacted more sharply to sanctions following Russia's decision to withdraw from SWIFT. If the decision to freeze the assets of the Central Bank of Russia is made, it could seriously shake the ruble.
Five days after the start of the war, Western sanctions are already having a serious impact on the Russian economy. It seems that this war will not be cheap for the Russian economy. Two Russian billionaires have already called for an end to the war. Business is seriously wary of a new wave of sanctions.
@ CESD, 2022
Impacts of the Russian-Ukrainian War on the Azerbaijan Economy
Will the Russian-Ukrainian War have any impact on the Azerbaijani economy? What does Azerbaijan buy from these countries and what do sell to them?
In 2020, the total trade turnover between Azerbaijan and Ukraine amounted to $ 771.5 million. During the year, Azerbaijan imported goods worth $ 418.455 million from Ukraine, and products worth $ 353.45 million were exported to this country.
As for the structure of goods imported from Ukraine to Azerbaijan, tobacco ($ 47 million 779 thousand), beef ($ 27 million 992 thousand), cigarettes ($ 22 million 165 thousand), poultry and its by-products ($ 20 million 977 thousand), butter, other dairy oils and pastes ($ 19 million 949 thousand), medicines ($ 16 million 713 thousand), hot rolled steel ($ 11 million 789 thousand), live cattle ($ 8 million 930 thousand), chocolate and chocolate products (7 million 553 thousand dollars), fresh fruit (8 million 452 thousand dollars), sugar confectionery (7 million 734 thousand dollars), bread, bakery products (7 million 677 thousand dollars), margarine, other useful food mixtures (6 million 326 thousand dollars), milk and cream (4 million 310 thousand dollars), etc. more prevalent.
During the year, Ukraine received more fresh fruit ($ 9,353,000), kerosene for jet engines ($ 3,210,000), fresh vegetables ($ 2,167,000), lubricants ($ 1,726,000), fruit and vegetable juices ($ 421,000), etc from Azerbaijan.
The total annual trade turnover between Azerbaijan and Russia was $ 2.671 billion. Azerbaijan imported from Russia goods and services with value of $ 1 billion 962 million and export to Russia was $ 709 million 390 thousand
Azerbaijan imported from Russia wheat (293 million 234 thousand dollars), long-cut forest materials (100 million 35 thousand dollars), mineral fertilizers (79 million 223 thousand dollars), hot rolled steel (55 million 843 thousand dollars), chocolate and chocolate products (47 million 603 thousand dollars), vegetable oils (46 million 162 thousand dollars), television receivers (44 million 473 thousand dollars), glued plywood (28 million 45 thousand dollars), medicines (27 million 585 thousand dollars), washing machines (23 million 586 thousand dollars), potatoes (23 million 515 thousand dollars), bread, bakery products (22 million 611 thousand dollars), wood chips (22 million 399 thousand dollars), margarine, other edible mixtures (20 million 610 thousand dollars), synthetic detergents (17 million 438 thousand dollars), wood fiber boards (15 million 436 thousand dollars), lubricants (15 million 68 thousand dollars), sugar confectionery (13 million 787 thousand dollars), minerals and carbonated water (12 million 464 thousand dollars), paper and card from it sanitary-hygienic products (11 million 311 thousand dollars), etc. products from Russia.
Azerbaijan exported fresh fruits ($ 274 million 832 thousand), fresh vegetables ($ 214 million 122 thousand), potatoes ($ 30 million 817 thousand), electricity ($ 11 million 738 thousand), petroleum coke ($ 9 million 616 thousand) , ethylene polymers ($ 8,318,000), fruit and vegetable juices ($ 8,148,000), bentonite clay ($ 7,956,000), cotton yarn ($ 5,315,000), canned fruit and vegetables ($ 4 million) 600 thousand dollars), tobacco (3 million 427 thousand dollars), natural grape wines and grape juice (2 million 880 thousand dollars), tea (1 million 689 thousand dollars), etc. products to Russia.
The structure of imports and exports of products in both countries shows that in the event of a long-term war, our foreign trade turnover with Ukraine is expected to decline. Minimization of transport links will also affect trade cooperation between the two countries. Of course, the scale of these effects will depend on the duration of the war.
As the war did not take place in Russia, it has not yet had a significant impact on trade relations with its northern neighbor. However, technical problems in importing goods from Russia has been already observed. But if the ruble continues to depreciate and sanctions reduce purchasing power in Russia, it could affect our non-oil exports. In this regard, it is important to diversify markets, especially by increasing exports of agricultural products to new markets, including the Gulf and the European Union. Diversification of export markets is also relevant in terms of minimizing the effects of external shocks.
@ CESD, 2022
CALL FOR THE BEST PAPER
CESD- Center for Economic and Social Development with support from the State Committee on Work with Diaspora of the Republic of Azerbaijan and the Napoli-Baku Association invites young researchers to apply to the Best Paper Call on “Role of Azerbaijan in ensuring energy security in Europe”. The conference will be taken place in Napoli, Italy in hybrid form on April 08, 2022.
The budget plan for 2022 envisages the primary goals for insurance of the economic growth in the upcoming year, emphasizing economic diversification as one of the key targets. Followed by the restoration of the liberated territories and recovery after the negative impact of the pandemic, the plan outlines a detailed analysis of fiscal policy forecasted for the year. An overview of the planned budget envisages the reliance of the economy on oil reserves and transfers obtained throughout it. To that end, approaches for further policies cover the creation of a favorable environment for the gradual replacement of oil revenues with non-oil revenues.
This independent evaluation aims to investigate the implementation of the 2020 State Budget of Azerbaijan. The pandemic, which has lasted since 2020, has brought significant changes in the world. The changes in terms of both quality and quantity were reflected in the economic environment and individual’s livelihood. Because of the requirement for long-term quarantine conditions to battle the pandemic, both developed and developing countries have experienced economic downturns.
Azerbaijan became the country among the post-soviet countries, that allocated the largest share of GDP, in order to eliminate the economic challenges caused due to the outbreak of COVID-19. Providing favorable economic conditions in the post-pandemic period is as crucial as supporting the economy during the period of the pandemic. It is an undeniable fact that the impact of the pandemic on the economy might be fully assessed only over time. Experience demonstrates that early evaluation may lead to even greater recession and instability. This paper aims to demonstrate the challenges faced by Azerbaijan in the framework of the fight against a pandemic. Since the economy of a country was affected, a detailed analysis may provide a better understanding of the outcome, enlightening the areas which need more support and development.
Restoring its territorial integrity, the Republic of Azerbaijan has entered a new era. The state authorities have to carry out restructure and infrastructure building tasks in the liberated territories to provide energy, utilities, transport infrastructure, and create conditions for life and business of citizens returning to their native lands. Therefore, one of the main features of the state budget for 2021 is the creation of financial security to implement the aforementioned honorable and responsible tasks. Along with their implementation, the budget for 2021 envisages the creation of financial guarantees for further improvement of the people’s welfare, sustainable economic development, and implementation of state programs.
Nowadays, global economic growth has been severely affected beyond anything passed in nearly a century. The outbreak of the coronavirus disease has brought its negative impact and destructive outcome on the economies alongside with the sharp fluctuations in global energy and stock markets. There might be observed a subsequent sharp decline in the number of transactions and practical shutdown of many markets due to the large-scale quarantine and self-isolation measures. Taking into consideration the abovementioned factors, it becomes clear that there emerged a need to revise all economic forecasts for 2020-2021. The International Monetary Fund (IMF) predicted a decline of the global economic growth rate in April (-3%), but in accordance with the current circumstances, the figures were revised in June, representing a 4.9% decrease. In spite of a fact that Azerbaijan became one of the first countries among the post-soviet countries, that allocated the largest share of GDP, in order to eliminate the economic problems caused due to the pandemic, the impact of the emerged difficulties made a necessity to revise the budget.
This study seeks to determine the impact the fall in global oil prices post-2014 had on the welfare of the populations of three resource-rich post-Soviet states: Russia, Kazakhstan, and Azerbaijan. Changes in welfare will be explored through the analysis of several socio-economic indicators affected by the local currencies’ devaluations. It will be suggested that the single-commodity export dependence of the countries concerned, and the domestic development of non-tradeable sectors faltered in the face of external shocks. Several policy suggestions are offered to mitigate the effects of the economic downturns observed.
The Ministry of Finance of the Republic of Azerbaijan presented the draft of the 2020 State Budget. According to the document, the growth rate of the Gross Domestic Product (GDP) in Azerbaijan is expected to decline by 2020. The draft State Budget takes the expected cost per barrel in 2020 as US $55. Despite the fact that it is US $5 less than the previous year’s price, it doesn’t fully ensure related risks. Thus, CESD suggests to take US $50 per barrel for the state budget next year.
CESD – the Center for Economic and Social Development – concluded its macro-economic survey results for the first nine months of 2019. According to the State Statistic Committee of Azerbaijan, Gross Domestic Product (GDP) increased by 2.5 % in January-September 2019 compared with the same period of previous year: The CESD’s figure for the same period was 2.0 %.
This research paper is a comprehensive study of the Azerbaijani government’s strategies for the tourism sector. It will gauge the government’s policy in affecting tourist patterns and explore whether the existing capacity of tourist infrastructure is aligned with the government’s goals. It will be suggested that several issues, such as targeted visa regimes, high prices in air transportation, and lack of adequate accommodations, detract from the sustainable development of the tourism sector in Azerbaijan and, as such, must be addressed by the government in order to make full use of the potential of this sector.
The government of Azerbaijan has expressed ambitious plans to ramp up the share of electricity gen-erated from renewable and alternative energy. Currently, most electricity in Azerbaijan is produced from fossil fuels, including natural gas. Beyond being the source of almost all electricity produced in Azerbaijan, oil and gas exports form the backbone of the Azerbaijani economy–making it highly sus-ceptible to price volatility in the global markets. Between 2018 and 2020, however, the government aims to increase its capacity for generating electricity from wind, solar and biomass by 420 Mega-Watt.
CESD – the Center for Economic and Social Development – concluded its macro-economic survey results for the first half of 2019. According to the State Statistic Committee of Azerbaijan, Gross Domestic Product (GDP) increased by 2.4 % in January-June 2019 compared with the same period of previous year: The CESD’s figure for the same period was 2.0 %. The GDP totaled 37,825 billion manat ($22,250 billion USD) in the first half of 2019.
A few days ago a fire broke out in one of the shopping malls located in Baku, Azerbaijan. According to local media which referenced official sources, the number of entrepreneurs who suffered financial damage due to the fire was 420. According to some reports, the financial loss caused to the entrepreneurs as a result of the fire was about 200 million manats. Although it’s a heterodox approach, the fire in the shopping center can be considered as a test of the existing business environment in the country, including state and economic institutions. Because the fire accident presents a number of shortcomings in the listed areas, as well as provides practical explanations for the difficulties observed in the implementation of the reforms into the economy.
This article analysis Azerbaijan’s automotive market pre and post oil price shock, specifically focusing on two factors is undermining the market, as well as preventions for future development. Firstly, a sole dependency on oil, as major part of Azerbaijan’s economy, which is a common characteristic for high level of oil exporting countries. Secondly, currency’s instability post oil shock. There are several reasons why automotive market has not only stopped growing, but also started to decline drastically in the last four years. This decline’s main reason is both new monetary and legislative policies that are adopted by government. Preventive actions to regulate the consumer loans market and prevent excess borrowing.
In January-February of 2019, activity in foreign exchange markets has further escalated. According to the information provided by the State Oil Fund of Azerbaijan (SOFAZ), during the corresponding period 951 million US dollars were sold, including 634.9 million in January and 316.2 million in February. This is 47.2% higher than the same period of the previous year.
Following the recession and stagnation of the economy of Azerbaijan in 2015-2017, a growth of 1.4% was recorded in 2018. Economic growth has been mainly driven by the following factors. Favorable foreign economic environment for Azerbaijan from the context of oil prices: the initial forecast of the oil prices by the Azerbaijani government at the beginning of 2018 was 45 US dollars per barrel. Then, during the second half of the year, the forecast was adjusted to 55 US dollars per barrel. However, the actual price of one barrel of oil for the reporting period was above 71 US dollars (29% higher than forecasted)…
The establishment of the Eastern Partnership (EaP) policy as a part of the European Neighborhood Policy (ENP) sets new objectives for the deepening of cooperation between the EU and EaP countries, and the greater integration of the EaP based on shared norms, values and standards. Forming the eastern divide of the ENP, Armenia, Azerbaijan, Belarus, Ukraine, Moldova, and Georgia are considered official neighbors of the EU, although half of these countries (Armenia, Azerbaijan and Georgia) do not lie on the immediate borders of the EU. However, these South Caucasian countries play an important transit role by connecting the EU with Central Asia and China. Hence, the Baku-Tbilisi-Kars (BTK) railroad, crossing Azerbaijan, Georgia, and Turkey, establishes a significant link in the further development and integration of regional and global transit corridors stretching from China to Europe through Central Asia and the South Caucasus.
The current external macroeconomic conditions observed throughout the year of 2018, such as increasing rates by FED/ECB, exerts certain pressure on the economies of developing nations. Despite hovering well-over its predicted value for most of the year, the recent decline in the price of oil once again puts question marks for the future of the commodity. Considering all of the above mentioned facts in mind, dependence of 2019 state budget of Azerbaijan on oil, where 50.4% of revenues directly come from the oil sector further makes the country more vulnerable to oil price fluctuations. The largest hike is observed in the amount of revenues collected through the excise taxes while the biggest decline is in income taxes, reflecting the new amendments to the tax code. Expenditures of the state budget are going to be 7.3% higher in 2019, with the most significant boost observed in construction sector. This fact undermines the efficiency of the public funds, as the expenditures towards construction are more likely to become subject of mismanagement. When looking at the SOFAZ’s budget, a clear trend of increasingly allocating more and more funds to the state budget can be seen. As expected, new amendments were made to the fiscal rule in order to make it more flexible, however, the effectiveness of these changes are still unclear.
Currently, in Azerbaijan and the Caucasus, the situation in the economies of the region is quite variable. On the other side of the ocean, the US Federal Reverse System has been continuously raising the key interest rate. In Russia, the ruble depreciated due to existing and probable sanctions, in Turkey, economic and political circumstances have led to the 40% loss of the lira’s value (and this figure is expected to further increase by the end of the year), and the withdrawal of the US from the Iran Nuclear Deal with replaced sanctions has caused more aggravation to the socio-economic situation and rapid deprecation of the Iranian rial in the southern neighbor of Azerbaijan. The so-called trade wars and new processes led by the current US government form serious risks for globalization and liberal trade.
The paper aims to bring readers’ attention to the Social Economy as an alternative economic system and reanimate the development of a Social Economy sector in Azerbaijan. At the moment, the term Social Economy does not have a fixed definition and, therefore, this study tries to provide an explanation of it. Moreover, this paper describes the implications and benefits of the Social Economy in and for Azerbaijan and offers mechanisms for its further development. The study explains the Social Economy’s necessity for the future sustainable development of the country, as there are important correlations between the two. There are many opportunities that can be opened by this sector and, thus, the country should develop a social-welfare-maximization approach to the economy.
From the second half of 2014, Azerbaijani public debt increased considerably along with several new challenges facing the domestic economy. During this period, the ratio of foreign debt to GDP rose from 8.6% (01.01.2015) to 22.8% (01.06.2018). The increase was 3.4 billion US dollars in nominal terms. At the beginning of 2018, Azerbaijan’s public debt amounted to 10 billion 100 million US dollars, while the value of loans taken with state guarantees reached 12 billion 682 million US dollars, raising the ratio of debt to GDP to 55%. The increase in the debt burden, particularly external debt liabilities, has caused concern both in the local community and in the government. Specifically, the deterioration of the financial situation of publicly-funded state institutions has raised the likelihood that the debt burden on this category will turn into a fiscal burden. As a result, the “Medium and long-term strategy for public debt management in the Republic of Azerbaijan” was approved on 24.08.2018.
According to a resolution of the Tariff Council of Azerbaijan, starting from August 2018, prices of passenger transportation services were increased by 50% across the board. The increase in prices covers both bus and metro transportation. Note that the share of bus and metro transportation of all transportation services in 2017 was equal to 96.3%, as reported in official figures. Thus, the increase in the tariff of passenger transportation services covers more than 96% of the sector. Although the Tariff Council has tried to justify its resolution with several arguments, continuing public discussions show that the resolution has caused serious dissatisfaction in society.
The problems that occurred in the supply of electricity in Azerbaijan as a result of an accident in the Mingachevir Thermal Power Plant (TPP) in the first week of July caused rightful concern among the public. This accident brought the energy security of Azerbaijan into question, as it revealed serious problems in an important strategic field of the country. Although there are 38 power plants in the country, the accident, which happened in just one of them, caused electricity to go out in 39 regions of the country. In addition, big enterprises owned by Baku Metropolitan, “Azersu”, and State Oil Company of Azerbaijan Republic (SOCAR), including hospitals and other institutions of strategic importance, stopped operating as a result of this accident.
As expected, in the 2nd week of June, the Azerbaijani government started to revise the state budget and make amendments to it. It should be noted that the higher-than-expected prices of hydrocarbon products in global markets have created a basis for the revision of the state budget, a practice frequently seen in the Azerbaijani experience.
The main points relevant to public interest can be grouped as follow:
– What changes in fiscal policy will occur following the increase in oil prices?
– Will spending of oil revenues accelerate?
– Which functional expenses will increase most in the case budget expenditures are increased?
– Will social expenditures (salaries, funds, pensions and social allowances) increase?
The Center for Economic and Social Development (CESD) constantly focuses on important social and economic processes in Azerbaijan. In this paper, we will try to answer the questions that are written above based on officially publicized information.
Governments have long relied on energy subsidies to advance specific development goals or address market failures. The most common argument for introducing and maintaining energy subsidies is that they support important domestic policy objectives, such as rural and industrial development, job creation, improved energy access, energy security and independence, and poverty alleviation. However, the economic cost of energy subsidies can represent a significant burden on a country’s finances, weaken its growth potential and encourage wasteful energy consumption. Analysis shows that energy subsidies tend to accrue not to those with the lowest income, but rather to the largest and most economically powerful recipients, thus increasing profits for well-connected investors or industries. By encouraging use of fossil fuels and discouraging production of low-carbon fuels, energy subsidies can lead to increased emissions of carbon dioxide and other greenhouse gas emissions.
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Demand for foreign currency auctions is increasing, foreign currency reserves of the Central Bank are decreasing and the Manat money base is getting smaller. These developments occurrence raises a question in the minds of stakeholders: will the current status quo of the exchange rate remain? How will the observed depreciations of neighboring countries’ currencies affect Azerbaijan’s non-oil exports? Will the current price of oil lead to changes in the monetary and fiscal policies of the government? In this research paper the latest trends in the above mentioned developments will be briefly analyzed and the monetary and exchange policies of the Central Bank, as well as the fiscal policy of the government, will be evaluated from the point of view of exchange markets. Along with these, potential short- and middle-run scenarios which may arise from the government’s exchange rate policy will be given at the end of the paper.
The subsequent destiny of the national currency’s (manat) exchange rate (after the presidential election in the Republic of Azerbaijan, April 11, 2017) is one of the main topics of public debate in recent weeks, as well as the main focus of the mass media. The main issue that disturbs public opinion is that following the election, changes in the exchange rate policy of state institutions can cause another devaluation of the manat. Given the relevance of the topic as the election date approaches, the Center for Economic and Social Development has decided to re-evaluate the prospects for the national currency’s exchange rate. It should be noted that, in line with the economic conjuncture, the Center regularly publishes expert advisory materials on the “manat” exchange rate.
The purpose of the research is to demonstrate the influence of oil price change on Azerbaijan as a whole in order to provide the explanation for the major developments of economic and social policies. Furthermore, the paper studies the impact of increasing and stabilizing oil prices on Azerbaijan Economy after the second half of 2016. It presents a macroeconomic analysis of the impact of stabilized oil price in Azerbaijan in 2017. Additionally, it assesses the overview of the economy with a holistic scene in macroeconomic analysis within 2017 with several comparisons to the previous years. The research mainly addresses the indirect effects of oil price increase on Azerbaijan after the recent recovery in the world oil price by building correlations to evaluate the changes…
The year 2017 posed severe challenges for the economy of Azerbaijan, as it experienced a 3.1% decline in 2016, its first negative GDP growth since 1995. According to initial estimations of EBRD, the economy was expected to experience another negative GDP growth equal to 0.5% in 2017. However, The State Committee of Azerbaijan Republic has announced 0.1 % positive growth in GDP in 2017. The recessionary environment coupled with the continuing fall in oil prices in early 2017 made matters look grim for the country, whose economy is massively dependent on the oil sector. Inflation, according to the State Statistical Committee, is still as high as 12.9%. In the meantime, growth in wages is lagging far behind the inflation rate, which decreases the purchasing power of the population. The trend of declining state budget expenditures stopped this year, with a new amendment in July, after oil prices surged…
The exchange rate of the national currency of Azerbaijan, the manat, will remain the main focus of socio-economic policy in 2018. During the course of the year, factors that will have a positive effect on the exchange rate of the manat – the price of oil, balance of payments, fiscal policy, monetary policy, political environment, etc. – will be stronger. In the course of this forecast’s preparation, risks of change in the current exchange rate policy were taken into account in light of important political factors which may emerge during the first 11 months of the year. As a result of the analysis, while there will not be a sharp drop in oil prices in the January – November 2018 period, there is a high probability that the national currency will remain steady, the probability of the manat strengthening with low interest rates will be low-middle and the probability of the manat cheapening is projected to be low. The influence of political factors on the determination of the manat’s exchange rate will weaken for the next period, while the price of oil will be an important indicator and the Central Bank will play a key role.
The State-Owned Enterprises of Azerbaijan are involved in the resource sector such as power generation, production of oil and gas, supply of water and airway, railway and freight services as well. Azerbaijani SOEs, such as the State Oil Company of the Azerbaijan Republic (SOCAR), “Azerenerji” and “Azersu” are Closed Joint-Stock Companies that enjoy a monopoly status in their own fields. The majority of the SOEs in Azerbaijan use their granted power to block new firms which are planning to enter the market. State-Owned Entities of the country have access to both financial and material aid. However, in Azerbaijan SOEs are not free from taxes, firms pay the tax burden that is allocated to them.
Since the year 2014, falling oil prices continued. In the beginning of 2016, oil prices bottomed at about USD 29 /bbl, but a gradual increase was recorded towards the end of the year. During 2016, an upward trend in oil prices was obvious, despite market interventions and the lower than average annual price of oil (USD 43.55 /bbl) compared to 2015.4 Currently, a gradually increasing trend for oil prices is being recorded for 2017 and there have not yet been any significant fluctuations observed. Throughout the years 2014-2017, the repercussions of dropping oil prices on the exchange rate of the national currency of Azerbaijan, the manat (AZN), have been easy to follow. During this period, oil price fluctuations have affected the Azerbaijani economy through the depreciation of the manat. As a substantial part of the country’s revenue is obtained from the sale of oil and gas, in times of high oil prices the country has experienced resource windfalls and consequent problems of economic diversification, leading to economic problems in times of low oil prices. In fact, falling oil prices in the global market directly impact the exchange rate of the manat, since this process creates a deficit in the balance of payments (BOP) of Azerbaijan, which in turn leads to a decrease in the foreign exchange reserves of the country.
The legislative project on the state budget of the Republic of Azerbaijan for 2018 and the state and consolidated budget projects of 2018 were publicized on 19th of October, 2017 according to the legislation on the Budget system. The main challenges facing the economy of Azerbaijan is its huge reliance on the oil sector for state revenue that, in turn, depends on the price of oil and trends on global oil markets. Taking 2014 as an example, which saw a sharp drop in the price of oil, the economy of Azerbaijan contracted. It is worth nothing that following the slumps in oil price, GDP growth of Azerbaijan steadily declined, eventually reaching -3,1% in 2016, the first negative growth rate Azerbaijan has seen since 1995. Revenues of the 2018 budget are estimated to be 20.13 billion manats ($11.84 billion dollars US). For 2018 budget revenues are estimated to be more than 24% compared to the revenues of 2017.
This research paper explores the role of small- and medium-sized entreprises in the economy of different countries, with a particular focus on Azerbaijan. The purpose of the research is to support and intensify the development of small- and medium-sized businesses in the country by determining the effectiveness of programs held by the government to encourage greater SMEs activity, as well as presenting successful examples from international practices in order to adopt them to Azerbaijan’s conditions. In the current period, the improvement of the entrepreneurship culture and enhancing the scope of small- and medium-sized businesses are important for the future economic growth, employment and income of the country’s population.
Well-known “Bilig” journal, which indexed by Social Sciences Citation Index, has published the CESD research article
The paper analyses the current level of economic and export diversification in three resource-rich Caspian basin Countries: Kazakhstan, Azerbaijan and Turkmenistan and attempts to reveal the underlying causes of high vulnerability of these economies to the recent oil price shock. On the other hand, the economies are evaluated in the light of so called subsidized economies, e.g. an economy mainly driven by public spending and current consumption expenditure. The latter in
this case are mainly fueled by monetary injections as a result of large resource windfalls encountered by an economy.
The paper can be downloaded at: http://bilig.yesevi.edu.tr/yonetim/icerik/makaleler/2080-published.pdf
The article reviews the new reforms of the pension system, new changes to the ‘Law on Labour Pensions of the Republic of Azerbaijan’ and its influence on the future of the pension system in the country. The new changes to the law are reviewed in detail, and written in a simple language, which makes it easier for ordinary citizens to understand.
The devaluation of Azerbaijan’s national currency, the manat, in February 2015, was the culmination of a series of long-term problems found within the “International Bank of Azerbaijan” Open Joint Stock Company (hereafter referred to as IBA). Assets that had lost value and sharply increased commitments added to other key factors, such as mismanagement of governance, trust, and corruption mechanisms on the part of the government and the negligence of supervisory bodies, and together resulted in the resignation of IBA’s Chairman of the Board, Jahangir Hajiyev, by a decision of the Bank’s Supervisory Board taken on March 18, 2015. It was then decided to privatize IBA, with a thorough rehabilitation preceding, by the Decree of the President of the Republic of Azerbaijan, dated July 15, 2015, on “The measures for rehabilitation related to the preparations for privatizing the state-owned shares of the International Bank of Azerbaijan OJSC”. It should be noted that in the early 2000s, international financial institutions and local experts considered privatization as the only way to avoid a series of negative consequences foretold after a close observation of the bank’s operations…
On March 9, Azerbaijan’s membership in the Extractive Industries Transparency Initiative (EITI) was suspended, during the 36th EITI Board Meeting held in Bogota, Colombia. Following the decision on the suspension, Shahmar Movsumov, executive director of the State Oil Fund of Azerbaijan (SOFAZ), chairman of the government commission on EITI and chairman of the EITI Multi-stakeholder Group, made an official announcement on Azerbaijan’s leaving the EITI: “I kindly ask the International Secretariat to remove Azerbaijan from the list of countries implementing the EITI immediately”…
The implementation of fixed exchange rate regime for 20 years (1994-2014) resulted in a formation of an insecure currency position for all interest groups, including the government and business. Although the pressures on manat have commenced to increase since the second half of 2014, the Central Bank and the government failed in comprehending the process. That is why, promising statements have been made to the general public. But the following events proved the underlying problem more severe and the implemented monetary, fiscal and exchange rate policies ineffective in the long-term. Business, citizens, as well as state-owned enterprises faced serious financial losses. The country experienced serious threats with regard to its financial sustainability.
Without a doubt, 2016 is considered as one of the painful years for the economy of the country. That is to say, the economy of the country encountered nearly 4.0 % decline [during January-November 2016 GDP fell by 3.9% compared with the previous year, SSCRA ], the depreciation of national currency continued, as a result, manat lost its value by 12.5% during the year. The depreciation of national currency reached 57% from January, 2015 until December, 2016.
On 20th January, Donald John Trump, an American businessman and TV entertainer is going to be 45th President of the United States of America (US). This is a hard-to-be comprehended statement by the academic and research communities, who did not expect the result of the US presidential elections to turn out this way. The possibility of Trump’s victory was repeatedly denied by the major research centres, and each scandal encouraged researchers to re-state their predictions on the soon-to-be collapse of the Trump election campaign. Needless to say, these predictions were proven false by the final election results.
According to the legislation on the Budget system, the legislative project on the state budget of the Republic of Azerbaijan for 2017 and the state and consolidated budget projects of 2017 were publicized on 29th of September, 2016. It has been three years that the legislative projects on the consolidated and state budgets of the Republic of Azerbaijan are being prepared amidst the absence of positive economic trends for the country. Specifically, during the preparation of 2017 state budget, external and internal economic impacts were considered at greater extent. As in previous years, the Center for Economic and Social Development has prepared a comparative analysis of the budget project publicized by the government…
In August, the exchange rate of national currency of Azerbaijan-“Manat” beat all historical records. That is to say, the exchange rate was 1 USD= 1.61 Manat in previous month . It should be noted that, the exchange rate hit 1 USD= 1.6 Manat in March, 2016. Since the second half of 2014, due to the fall of oil prices in the world markets there is a visible pressure on the national currency ‘Manat’. Overall, the Azerbaijani “Manat” lost 49.6% of its value in 2015 and in addition, a depreciation of more than 3% in the first 8 months of 2016, the losses could reach 52.2%. Although the occurring rapid dollarization and the observed stagnation in the business environment especially in imports in the first months of 2015 and 2016 resulted in short-term reduction in foreign exchange demand in the March-May period of this year and strengthening the exchange rate of USD/Manat at the level of 1.49, the process of depreciation proceeded again afterwards.
Azerbaijan’s tradition in the business of oil and gas started in the 1800’s with the involvement of international oil companies and thanks to the fossil-energy Azerbaijan turned to be one of the world´s biggest oil producers. Taking into consideration the current status in the country, the Energy Union could provide to Azerbaijan a position of stability and security through the implementation of all 5 policy areas that the EU suggests (supply security, a fully-integrated internal market, energy
efficiency, climate action-emision reduction and research and innovation)…
The trade relations between Azerbaijan and the European Union are a substantial part of enhancing economic and political relations among both parties. Recent years have been characterized by an expansion of the trade volume between two parties; the EU turned out to be Azerbaijan’s biggest trade partner, in terms of both imports and exports. Moreover, trade in services and foreign direct investment relations were also on rise. On the other hand, Azerbaijan is one of the main energy suppliers of the European Union among European Neighborhood countries and is a key partner to guarantee energy security.
Additionally, this research paper analyzes the potential benefits of joining the Deep and Comprehensive Free Trade Area (DCFTA) of the EU, showing specific data with the support of the Computable General Equilibrium (CGE) model.
It has already been three month since the national currency of the Republic of Azerbaijan continuously loses its value. Since the second half of 2014, due to the fall in oil prices on the world markets, the resulting pressure on the national currency – ‘Manat’ is ongoing nowadays. Overall, Manat lost 49.6% of its value in 2015 and in addition, with more 3% depreciation in the first 7 months of 2016, the losses could reach 52.6%. Although the occurring rapid dollarization and the observed stagnation in the business environment especially in imports in the first months of 2015 and 2016 resulted in short-term reduction in foreign exchange demand in March-May period of this year and strengthening the exchange rate of USD/AZN at the level of 1.49, the process of depreciation proceeded again afterwards. As a result, the national currency increased its annual losses to the level of 3% in June-July, by depreciating 7% against the US dollar again…
During the course of 2015 Azerbaijan suffered the impact of two devaluations of the national currency, Azerbaijani Manat (AZN), due to the decrease of the world oil prices. Given that oil and natural gas accounts for more than 90% of Azerbaijani exports, continued low world oil prices had a critical negative impact on the Azerbaijani economy. The current situation has led Azerbaijan to establish new priorities that could help restructure the financial system at this critical moment. The drastic change in the economic outlook of the country has created the need to open a wider window to the European Union (EU) in order to overcome the current economic downturn. The bilateral relations between Azerbaijan towards the EU have not reached fully its potential, if we compare it with other countries that have the same profile. A possible geopolitical change of Azerbaijan towards the European Union could be the first step to a transformation in the structure of the country and an improvement in the sectors of energy, trade, migration, tourism and agriculture…
In 2016 and years thereafter, the economies of Turkey and Russia will experience considerable change due to sanctions imposed by the Russian government as a response to the downing of a Russian war plane in November 2015.The dissolution of Russian-Turkish ties has also affected neighboring regions, especially the South Caucasus. As a result, there will be a transformation in economic, political,demographical and social trends. The sectors of agriculture, energy and especially tourism will face tremendous changes with the performance of new key players…
In 2015, the expansion of the US economy accompanied with improved employment rates led the FED to switch to contractionary monetary policy. On the other hand, the second largest economic power-China encountered a lower long-term economic growth rate with a fall in exports, and thereby adversely affecting global economic activity. Moreover, the rapid decline of prices in global fuel markets, owing to fundamental and political reasons, resulted in an economic downturn in countries reliant on their fuel exports, while importers experienced a higher economic activity in parallel with lower inflation expectations. Since the monetary and economic policies were originally anchored to the oil price of 90 USD, the average of 53.4 USD resulted in an economic imbalance, and ultimately leading to the second sharp devaluation at the end of the year (21.12.2015). That is to say, the Central Bank could no longer pursue the fixed exchange rate regime, and switched to the floating regime. As a result, national currency lost its value by 98.7% officially, and 120% actually during the year…
Situated in the Caucasus, one of the most geopolitically delicate regions of the world, Azerbaijan has always been careful to build relations with its ‘big neighbours’. Baku is distinguished for its balanced approach to the foreign policy, which tries to manage the balance between the West, Russia, Turkey and, of course, Iran. The ‘balanced foreign policy’ was and is the only way out of the situation – to which nature itself placed Azerbaijan – for Baku to maintain its sovereignty. Therefore, Azerbaijan’s foreign policy, which highlights neutrality between the parties (this is in contrast to the neighbouring Georgia and Armenia’s policy) and balance, can be called ‘specific’. Even so, the Iranian-Azerbaijani relations have a particular specificity. There are many reasons for this. After the Arab conquest (the Islamisation of Iran), Azerbaijanis role in the history of Iran is not less significant than the Persians. For many centuries, they were part of a single state. Since the Islamisation of Iran in the VII century, the predominant number of the dynasties that have established their own state and ruled in Iran, or the region including the territory of modern Iran, have Azeri roots or ethnically were very close to Azerbaijanis. Qajars – the last Iranian dynasty, which had Azerbaijani roots – were overthrown by the Persian Pahlavi dynasty in 1925. Just this factor alone would be sufficient for making the Azerbaijani-Iranian relations specific. Nevertheless, there are other points.
Center for Economic and Social Development (CESD) has produced paper on analyzing of the 2016 state budget in Azerbaijan. The paper provides an overview of 2016 budget in Azerbaijan. It begins in Section 2 with a description of total public revenue in Azerbaijan, size of revenues from main sources, how this has changed between 2011 and 2016, and a brief review of components. Section 3 provides detailed account of how public allocation of spending has changed over 2011 and 2015, its structure and individual spending components. Nine main spending components considered include social security, education, health, legislative bodies, defense, housing, agriculture, transport and economic activities assistance, which collectively account for about 50% per cent of overall spending. Section 4 concludes.
The short history of transition to the economic model is based on the modern principles of the market and assurance to the trade surplus that was formed by natural resources within external trade. During previous periods in Azerbaijan these ones were considered the main causes for the shape of production and export opportunities according to the principles of comparative advantage. It is not a coincidence that the size of the non-oil sector does not even reach the 10% (7.4% in 2013) of the export. In addition, exports are approximately six times less than imports. Other important issues are the increase of citizen’s welfare, the creation of a strong supply of food for the country, and the support of an effective use of a potential export through the use of agriculture, which is an essential part of Azeri employment (37.1% in 2013). Additionally, the agricultural sector needs to be more profitable in Azerbaijan. For the reasons mentioned above, the main aims of this research are to analyze the local characteristics of agriculture, to define the export possibilities and products that have comparative advantages in agriculture, and to research about countries in which there are more suitable market conditions and export opportunities.
Center for Economic and Social Development (CESD) has produced paper on analyzing of the 2016 state budget in Azerbaijan. The paper provides an overview of 2016 budget in Azerbaijan. It begins in Section 2 with a description of total public revenue in Azerbaijan, size of revenues from main sources, how this has changed between 2011 and 2016, and a brief review of components. Section 3 provides detailed account of how public allocation of spending has changed over 2011 and 2015, its structure and individual spending components. Nine main spending components considered include social security, education, health, legislative bodies, defense, housing, agriculture, transport and economic activities assistance, which collectively account for about 50% per cent of overall spending. Section 4 concludes.
Azerbaijan is a reliable partner in the energy security issue for the oil importer countries. Country has sufficiently traditional energy resources which already invested on this energy sector. However, country geographical location gives opportunity in order to use the alternative and renewable energy resources which helps to keep the balance of the utilization of energy resources. The energy security is also main important issue for the country. Therefore, country broaden the relation with the EU in the context of EU energy security and EaP partnership countries.
Starting on February 21st, 2015 the official exchange rate of the dollar to the manat, the Azerbaijani national currency, has been set at 1.05 manat, which is 33.86 percent higher than the exchange rate set prior to the beginning of the exchange rate weakening process. The Azerbaijani national currency has been depreciated against US dollar for the first time since 2006. Since the sharp drop of crude oil prices in the world market in the fall of 2014, the Central Bank of Azerbaijan has faced the dilemma of either a sharp depreciation or a gradual devaluation of the manat. In fact, the Central Bank has announced that a sharp depreciation would not be in the government’s agenda in the near future. But, just two days after the Central Bank’s governor’s official declaration on not having a sharp depreciation, the national currency of Azerbaijan has lost its value against major foreign currencies by 33.86 %. The Manat’s rate dropped to 1.05 from 0.78 against to US dollar.
The main goal of the study is to assess how oil price decline in the world market will potentially impact Azerbaijani Economic. The paper specifically looks how last changes in the world market will effect on both revenue and expenditure sides of the state budget. The study also examines “side impact” and “domino effects” of low oil prices.
As an oil exporter country Azerbaijan might face the effects of a sharp fall in oil revenue after oil price decline in the world market. Azerbaijan is heavily dependent on oil and natural gas export revenues. In 2013, Azerbaijan hydrocarbon exports revenues accounted for 95% of the country’s total export revenues, and 64 % of total fiscal revenues.
In public finance part, the paper particularly deals oil price decline’s impacts on the 2105 State Budget of Azerbaijan Republic. The study calculates how every $1 per barrel drop in the price of “Azerlight” results annual revenue loss, including losses of GDP, normal export levels and country’ budget.
Center for Economic and Social Development (CESD) together with Konrad-Adenauer-Stiftung (KAS) have published new policy paper titled as “Azerbaijan’s accession to the WTO: Assessing the macroeconomic consequences for the economy of Azerbaijan”. The paper analyzes the macroeconomic consequences for Azerbaijan’s economy in case the country joins the World Trade Organization (WTO ). Existing studies primarily draw on qualitative methods, while for this study a Computable General Equilibrium (CGE) model of the economy is calculated to simulate the consequences of WTO accession. The authors are able to generate numeric forecasts for macroeconomic variables as a measure for welfare and elaborate how WTO accession, interpreted as an external shock to the economy, would affect these variables.
This study is, therefore, a unique contribution to the public and academic debate as it is the first study to quantitatively gauge the effects of accession beyond qualitative arguments. To contextualize the quantitative findings, several independent experts were interviewed to compile their opinions on WTO accession.
The results of this study suggest positive welfare effects of WTO accession through increases in income, consumption and savings. However, the forecasts generated through our model reveal that exports would plummet as a consequence of accession. This must be of particular concern for the Azerbaijani economy with its oil and energy sector currently being the main driver of gross domestic product, foreign direct investment and exports. As a consequence, the Azerbaijani economy needs to diversify rapidly and decrease its dependence on oil to realize positive effects on general welfare that could be triggered through WTO accession. Whether these positive effects will materialize in the long run is hard to predict, although the qualitative evidence cited in this study suggests that accession would bring along important incentives for diversification.
CESD- Center for Economic and Social Development, Azerbaijan has developed new research paper titled as “Competitiveness in Azerbaijan: Assessing Sectorial Economic Policies”. This publication was developed and printed with the support of Friedrich-Ebert-Stiftung.
This research paper assesses economic diversification and cross-sector competitiveness in Azerbaijan by employing extensive qualitative and quantitative methodologies. The paper will measure the extent to which Azerbaijan’s economy is labor- and GDP-diversified or not. If it is not, we must ask what kind of policies can be developed for sectorial diversification and economic development. This paper will further analyze the government’s fiscal and monetary policies aimed at developing better, quantitatively based recommendations.
Accession to the Customs Union: Shaping the strategy for Azerbaijan
This paper analyses the implications of the potential accession of the Republic of Azerbaijan to the Customs Union of Belarus, Kazakhstan, and Russia, combining qualitative and quantitative approaches. The qualitative approach employs stakeholder and sectorial analysis, while quantitative methodologies include Hedonic Estimation and Linear Regression Models. The stakeholder analysis discusses the implications of accession for different interested parties, namely businesses, citizens and international partners of Azerbaijan. The sectorial analysis assesses the varied probable impact of accession on different economic sectors. The quantitative methods are designed to answer the question following question: How much would the Azerbaijani economy benefit if it had joined the Customs Union when it was established in 2010? Although CESD finds a number of quantitative benefits to accession (for example, an additional two to five percent growth in GDP), qualitative analysis reveals disadvantages that were not captured by quantitative methodologies and helps provide a more comprehensive picture that disfavors accession, namely the long-term disadvantage of ceding independence vis-à-vis Azerbaijan’s energy policy. Accordingly, the Center for Economic and Social Development strongly recommends against accession. However, considering economic, social and political pressures, Azerbaijan may be persuaded to accede. In this scenario, CESD would recommend learning from the experience of the UK while acceding to the European Union and attaining several key exemptions from the rules and regulations of the Customs Union.
All over the world, corporate social responsibility (CSR) has become more and more popular in the business community. In many developed countries, CSR has taken on the character of strategically planned actions that benefit all levels of society, and it has grown from entrepreneurial initiatives to state policy. In spite of these globally positive trends in this field, the development of corporate social responsibility in Azerbaijan is fragmented. In recent years philanthropy activities among companies in Azerbaijan have become popular, yet few companies have a strategically planned approach to CSR. The development of CSR in Azerbaijan faces numerous challenges on various levels, from the public sector to civil society. The subject of this report is to give a comprehensive analysis of the current state of CSR in Azerbaijan, and the way how to make its development more effective. The main tasks of the current study are as follows: to define the main components of the concept of corporate social responsibility; to compare foreign experiences in the field of corporate social responsibility and to highlight positive trends that may serve as role models; to study the history of corporate social responsibility in Azerbaijan; to describe the standing of corporate social responsibility in Azerbaijan in terms of legislation and public perception; to analyze stakeholders’ interests in corporate social responsibility as it relates to governmental and non-governmental agencies; to summarize and to give recommendations on how to institutionalize elements of corporate social responsibility in Azerbaijan.
The State Statistic Committee reports that industry production increased by 1,8 % in non-oil sector and 10,0 % in oil sector. Meanwhile, state bodies believe that oil GDP increased by 0,1 % last year. CESD household survey and expert modeling has come to conclusion that both total GDP and non-oil GDP increased in 2013, however, CESD figures are not the same with official ones.
Some official figures, however, even do not support each other. There are discrepancy even between official reports of state bodies. According to the State Statistic Committee 43,1 million oil produced in 2013. The state committee found out 0,1 % growth in oil output. State Oil Company of Azerbaijan Republic (SOCAR), however, announced that 43,389 million ton oil produced in 2012 (http://new.socar.az/socar/en/home). So, according to official figures oil output in Azerbaijan was 43,4 million ton in 2012 and 43,1 million ton in 2013. Just the comparison of official reports on oil output shows that oil production decreased 0,1 % in 2013 compared with 2012. The amusing thing is that even official figures do not confirm growth in this sector, but the State Statistics Committee officially announced growth for 2013.
When the rules of international law, practices and conventions are all studied, it becomes evident that there exist certain rules of international legislation which enable the countries not bordering the high seas to reach the open seas. However, differences in practice arise due to geographical conditions, balance of power and economic development. In order for the countries concerned to reach the open seas and benefit in transit from the territory of the neighboring countries located by the high seas for trade and transportation, it is essential that the two countries should have good relations and that the country bordering the high seas should have good-intention. Because in Eurasian Geography, almost none of the countries in Central Asia and Caucasus do not border the open seas, they are in need of other countries for trade and transport. In this study, the focus is on this issue.
This paper seeks to outline how Azerbaijan should manage the numerous foreign policy challenges it faces due to its strategic location, wealth in resources, neighbors and surrounding conflicts. As a small state, Baku should seek to balance interests and pursue a path of multipolarity, without however forfeiting a strong stance towards governments that threaten its status quo. Russia, Turkey, Iran, Israel and the West all have their interests and Azerbaijan has to become a pawn in the hands of the powerful. The resolution of the “frozen conflict” over Nagorno-Karabakh would mark a great step in the right direction, providing Baku with more leverage. The economic power of Azerbaijan gives the South Caucasian Republic a unique asset and allows Baku to play a balancing role regarding conflict prevention and conflict solution in this region which is often described as a geopolitical chessboard. Download Full Paper Here
Estonian Center for Eastern Partnership released survey results conducted in all EaP countries including Azerbaijan. CESD was responsible for preparing Azerbaijani part of the report. The purpose of the survey was to assess how effectively the countries of the Eastern Partnership manage technical assistance rendered by the EU. This purpose was divided into the three objectives, which cover broadly the stages of provision of the EU assistance to an Eastern partner country. The research team presented the first aggregated survey findings to a seminar “Effective management of the EU assistance by recipient governments of Eastern Partnership countries” in June 2012 in Tbilisi, where the representatives of EaP governments, the EU and individual experts reflected on survey results against the background of experience accumulated under the ENPI since 2007, new policy challenges (AA, DCFTA) and the related new assistance tools such as CIB, as well as the upcoming changes to the Union assistance framework.
Azerbaijan oil production started to decline rapidly since 2010. In fact, dramatic fall in oil industry continues to hamper the country’s total growth in 2012. It was the main reason that Government of Azerbaijan (GoA) has adjusted its previous official forecast of 5.7 % GDP growth in 2012 to 2.5 % in the second half of 2012. Thanks to affected growth in non-oil sector, the country was able to keep growth track last year since State Statistics Committee announced GDP growth was 2.2 % in this period. Download Full Paper Here
CESD has produced new paper on Iranian economy on the background of the new sanctions. The paper looks current situation of Iranian economy, potential impacts of new sanctions, Iranian relations with West, neighbors as well as with Azerbaijan. The paper also focuses on social and economic impacts of new sanctions not only on Iranian economy but also Iranian population.
United States Agency for International Development (USAID) presented the fifteenth edition of the CSO Sustainability Index for Central and Eastern Europe and Eurasia, covering developments in 2011. The Sustainability Index reports on the strength and overall viability of CSO sectors in each of the twenty nine countries in the region, from the Baltics to Central Asia. The Index highlights both advances and setbacks in sectoral development, and allows for comparisons across countries and sub-regions over time. The Index is an important and unique tool for local CSOs, governments, donors, academics, and others to understand and measure the sustainability of the CSO sector.
In spite of the fact that government of Azerbaijan (GoA) has failed to achieve projected economic growth forecast for the first half of 2012, the State Statistic Committee reported 1,5 % GDP Growth. Government of Azerbaijan projected 5,7 % growth for 2012. GDP per capita was around $ 6,0 thousand (without PPP) in the first half of 2012. According to State Committee inflation rate was 2,2 % in this period which officially projected 6,0 %.
The Foreign Policy Center, UK, produced report titled “Spotlight on Azerbaijan”. Spotlight on Azerbaijan contains a broad analysis of some of challenges Azerbaijan faces, and explores the role and goals of the international community. The report makes a series of recommendations for action. The economic part of the report was developed by the Center for Economic and Social Development (CESD). The CESD also contributed on some other issues stated in the report.
The full report is available here;Download Full Report
Decline wave in production sector keep on the first quarter of 2012 in spite of the fact that Government of Azerbaijan has been trying to attain expansion in above mentioned sector. Considering keeping still high portion of oil sector in total GDP, decline in oil sector noticeably reduce economic growth rate in Azerbaijan. Oil sector is still dominant in both GDP and budget revenues based on the results of the first quarter of 2012. In fact, one-sided development of the
economy has begun to show its negative symptoms. As a result, the country’s economic growth rate both in the first quarter of 2012 and in 2011, for the first time, decreased to its lowest level since 1996. The main cause of this was the decrease in the oil sector by 5.8%. In this respect, even the 7,7% growth in the non-oil sector in the first quarter of 2012 could not counteract this negative impact on economic growth. Fall in the oil sector has also had a negative impact on the whole industry and a 0,3% decrease has already been noticed in this field.
Official forecasts for the economy of Azerbaijan in 2012 seem quite optimistic. According to the Ministry of Economic Development reports, the Government of Azerbaijan (GoA) targets 5,7 % GDP Growth in 2012, meanwhile The Central Bank of Azerbaijan is eager to keep inflation at single digits. Recently, The Central Bank announced that inflation rate will be kept no higher than 6,0 % in 2012. It is worth to mention that the annual inflation rate for December 2011 was 8%, according to the State Statistical Committee of Azerbaijan.
The CESD report on Azerbaijan’s foreign trade analyzes challenges and current developments in this sector. The paper reviews how foreign trade relations changed particularly in terms of countries and commodities since the independency. Different sources are referenced in the report in order to comparatively illustrate existing circumstances in above mentioned sector…. Download Full Paper Here
Government of Azerbaijan (GoA) failed to achieve economic growth forecast for 2011. According to the State Statistic Committee Gross Domestic Product (GDP) increased by 0.1 % and reached to 50.10 billion manat ($ 64,23 billion) in 2011 although th GoA projected 3,8 % growth for last year. The State Committee reported that GDP per capita without PPP was 5530.6 manat ($ 7003, 4) in 2011. According to State Committee inflation rate was 7,9 % in 2011 which officially projected only 5,0 %.
The report analyzes Azerbaijan Economy since independence which has been through economic crisis, stability, and rapid development. All these steps taken toward development have been remembered ever since for both their uniqueness as well as their conformity to economic realities: firstly, the recession (1992-1995) recovery (1996-1997), boom (1998-2008) and final slump (starting 2009). Thus, when evaluating the past 20 years of the economy of the Republic of Azerbaijan, it is of great importance to pay close attention to its growth and prosperity and draw conclusions about the developmental process itself. However, the overall picture is that it is hydrocarbon resources and its gradually increasing income that (played a profound role in helping Azerbaijan achieve economic stability). Economic growth rates have increased, the level of unemployment and inflation have decreased, and large amounts of foreign investments have flowed into the country, which have all contributed to the development of the economy. In recent years, however, one-sided development of the economy has begun to show its negative symptoms. As a result, the country’s economic growth rate in 2011, for the first time, decreased to its lowest level since 1996…Download Full Article Here
Micro and small and medium sized entrepreneurship in Azerbaijan is divided into two groups: individual entrepreneurs (i.e. sole owners of the enterprise without forming a legal entity); and small- and medium-size enterprises (i.e. legal entities). All individual entrepreneurs are legally considered small enterprises by default, whereas those registered as legal entities are classified according to two indicators: number of employees and annual turnover…Download Full Publication Here
Azerbaijan gets $100 million profits from tourism, however Cyprus which occupies smaller territory earns $2 billion from this sector. Azerbaijan has a great capacity to develop tourism. Nevertheless government should guarantee forming competitive tourism business through implementing relevant infrustructure projects in the direction of turning this capacity into opportunities as well as developing it. In comparison with neighboring countries development of tourism is very low. (Download the paper)
The high inflow of oil revenues to Azerbaijan in recent years has led to large and unsustainable increases in government expenditures in the state budget and State Oil Fund of the Azerbaijan Republic. Given that oil revenues are exhaustible, volatile, and unpredictable, a sustainable fiscal policy must be enabled that allows for intergenerational equity, diversification in the economy, and predictable annual revenues that reduce pressures of appreciation. Download Full Paper Here
Sector Policy Convergences in technical rules/standards and customs in Azerbaijan to support EU Eastern Partnership Initiative
The overall goal of this paper is to understand how Azerbaijan can converge its Trade and
Customs Policy with the European Union to meet the economic integration goals set in the
EU Eastern Partnership Initiative in Azerbaijan. More specifically, the paper is interested in
harmonizing standardization, Technical Barriers to Trade, and customs legislation with the
European Union. (Download the Paper).
In the interest of fighting against corruption in an effective and enduring way, the implementation of comprehensive measures is extremely important. As such, the package of anti-corruption measures prepared by the Center for Economic and Social Development (CESD) has been developed to strengthen the fight against corruption and bribery and to achieve long- lasting results. CESD_Anti_Corruption_Strategy
Paving the Road towards Visa-free Travel between Eastern Partnership countries and the EU; the Case of Azerbaijan
Visa Liberalization is a very huge step in the integration to the EU. Visa Liberalization will facilitate economic integration, enable Azerbaijan to access the European market, and explore trade and investment opportunities. It will also increase people-to-people contacts, which is also important for Azerbaijan. (Download the paper)
This assessment will seek to describe the present situation of policy analysis in Azerbaijan. The methodology used by the author has been desk research and more importantly, semi-structured face-to-face interviews with representatives of policy research institutions, international development agencies, independent policy analysts, and university lecturers in Azerbaijan. (Download the paper)
According to government sources, last year Azerbaijan economy was noticeable for its decreasing trends of crisis. However, the amounts of international debts have increased, after 2008-2009 of deflation, there was significant increase in inflation rate. (Download the paper)
What are essence and key functions of the World Trade Organization (WTO)? What changes will be arisen after the accession of Azerbaijan to an institution introduced without any alternative? Why we couldn’t reach any consent within the 13 years negotiations? What will be advantages and disadvantages of WTO membership? Despite these questions are not fundamental, they are of real interest in a period when the globalization is widening more and more and the economic integration is unavoidable. This document has been drawn up to find out answers to the tens questions mentioned or not mentioned previously. (Download the paper)