Economy of Azerbaijan

Azerbaijan is an economy that has completed its post-Soviet transition into a major ECO economy (with the completion of the Baku-Tbilisi-Ceyhan Pipeline), from one where the state played the major role. Azeri GDP grew 41.7% in the first quarter of 2007, possibly the highest of any nation worldwide.^[14] Such rates cannot be sustained, but despite reaching 26.4% in 2005 (second highest GDP growth in the world in 2005 only to Equatorial Guinea), and 2006 over 34.6% (world highest), in 2008 dropped to 10.8%, and dropped further to 9.3% in 2009 ^[15]. The real GDP growth rate for 2011 is expected at 3.7%^[16].

Large oil reserves are a major contributor to the economy. The national currency, the Azerbaijani manat, was stable in 2000, depreciating 3.8% against the dollar. The budget deficit equaled 1.3% of GDP in 2000.

The government has undertaken regulatory reforms in some areas, including substantial opening of trade policy. The government has largely completed privatization of agricultural lands and small and medium-sized enterprises. In August 2000, the government launched a second-stage privatization program, in which many large state enterprises will be privatized. Since 2001, the economic activity in the country is regulated by the Ministry of Economic Development of Azerbaijan Republic.

Macro-economic trend

The following is a chart of trend of gross domestic product of Azerbaijan at market prices^[17] with figures in millions of Manats.

For purchasing power parity comparisons, the US dollar was exchanged at 1,565.88 Manats only. Currently, the new Manat is in use, with an exchange rate of about 1 manat = $1.10. Mean graduate pay was $5.76 per manhour in 2010.

For more than a century the backbone of the Azerbaijani economy has been petroleum, which represented 10 percent of Azerbaijan’s GDP in 2005, and is projected to double to almost 20 percent of GDP in 2007.^[18] Now that Western oil companies are able to tap deepwater oilfields untouched by the Soviets, Azerbaijan is considered one of the most important areas in the world for oil exploration and development. Proven oil reserves in the Caspian Basin, which Azerbaijan shares with Russia, Kazakhstan, Iran, and Turkmenistan, are comparable in size to the North Sea.

External trade

Azerbaijan has concluded 21 production-sharing agreements with various oil companies. An export pipeline that transports Caspian oil to the Mediterranean from Baku through Tbilisi, Georgia to Ceyhan, Turkey (the Baku-Tbilisi-Ceyhan Pipeline) became operational in 2006. The pipeline is expected to generate as much as $160 billion in revenues for the country over the next 30 years. The recent high price of oil is highly beneficial to Azerbaijan's economy as the nation is in the midst of an oil boom. Eastern Caspian producers in cara was here Kazakhstan also have expressed interest in accessing this pipeline to transport a portion of their production. In March 2001, Azerbaijan concluded a gas agreement with Turkey, providing a future export market for Azerbaijan.

In 2002 the Azerbaijani merchant marine had 54 ships.^[19]

Overview

Through the Soviet period, Azerbaijan had always been more developed industrially but also under diversified, as a result of slow investment in non-oil sector. With a history of industrial development of more than 100 years, Azerbaijan proved to be a leading nation in Southern Caucasus throughout the Soviet Union collapse in early 1990s until nowadays.

Oil remains the most prominent product of Azerbaijan's economy with cotton, natural gas and agriculture products contributing to its economic growth over the last five years. More than $60 billion was invested into Azerbaijan's oil by major international oil companies in AIOC consortium operated by BP. Oil production under the first of these PSAs, with the Azerbaijan International Operating Company, began in November 1997 and now is about 500,000 b/d. People visit petroleum spas (or "oil spas") to bathe in the local crude in Naftalan^[20] A leading caviar producer and exporter in the past, Azerbaijan's fishing industry today is concentrated on the dwindling stocks of sturgeon and beluga in the Caspian Sea.

Azerbaijan's energy resources brighten its long-term prospects. Azerbaijan has begun making progress on economic reform, and old economic ties and structures are slowly being replaced.. Trade with Russia and the other former Soviet republics is declining in importance while trade is building up with Turkey, Iran, UAE, and the countries of EU. Azerbaijan is also a member of the Economic Cooperation Organization (ECO). Long-term prospects will depend on world oil prices and the location of new pipelines in the region. In 2010, Azerbaijan entered into top eight biggest oil suppliers to EU countries with € 9.46 billion.^[21]

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Business environment

In 2008, Azerbaijan was cited as the top reformer by the World Bank's Doing Business report:^[26]

Azerbaijan led the world as the top reformer in 2007/08, with improvements on seven out of 10 indicators of regulatory reform. Azerbaijan started operating a one-stop shop in January 2008 that halved the time, cost, and number of procedures to start a business. Business registrations increased by 40% in the first 6 months. Azerbaijan also eliminated the minimum loan cutoff of $1,100, more than doubling the number of borrowers covered at the credit registry. Also, taxpayers can now file and pay their taxes online. Azerbaijan’s extensive reforms moved it far up the ranks, from 97 to 33 in the overall ease of doing business.

Other statistics

Data from CIA World Factbook^[27] unless noted otherwise

Investment (gross fixed)–

21% of GDP (2008 est.)

Household income or consumption by percentage share–

·         lowest 10%: 3.1%

·         highest 10%: 29.5% (2001)

Inflation rate (consumer prices)–

21.6% (2008 est.)

Agriculture–

·         utilized agricultural land: 47,551 square kilometres (18,360 sq mi) (2007)^[28]

·         total wood resources: 136 million cubic metres

·         crops: cotton, grain, rice, grapes, fruit, vegetables, tea, tobacco

·         livestock products: beef, mutton, poultry, milk, eggs

Industrial production growth rate–

12% (2008 est.)

Electricity–

·         production: 23,80 billion kWh (2007)

·         consumption: 27,50 billion kWh (2007)

·         exports: 800 million kWh (2007)

·         imports: 500 million kWh (2007)

Current account balance–

·         $19,36 billion (2008 est.)

Exports - commodities–

·         petroleum and natural gas, petroleum products, oilfield equipment; steel, iron ore, cement; chemicals, petrochemicals, textiles, machinery, cotton, foodstuffs.

Reserves of foreign exchange and gold–

·         $30 billion (2010 est.)

Debt - external–

·         $2.73 billion (2008 est.)

Economic aid - recipient–

·         ODA, $223.4 million (2005 est.)^{[citation needed]}

Currency–

·         1 Manat = 100 gepik

Exchange rates–

·         Azerbaijani manat per US dollar - 0.7893 (as of 2011^[29]

·         Azerbaijani manat per Euro - 1.24 (as of 2008)

Fiscal year–

·         Calendar year