In 2021, besides base effects stemming from the relaxation of coronavirus-related restrictions on activity and movement, increased oil production under the agreement with the Organization of Petroleum Exporting Countries and higher gas production as exports to Europe ramp up with the completion of the Trans-Adriatic Pipeline at the end of last year underpin Moody's real GDP growth forecast of around 3.5%, APA-Economics reports citing Moody's.
Over the next 2-3 years, Moody's estimates growth to average around 3%, supported by ongoing reinvestment in the existing oil and gas fields -- such as a new platform in the largest Azeri-Chirag-Guneshli field that will help sustain production at current levels for some time -- and increased oil and gas production from the completion of ongoing projects at the Karabakh and Absheron fields.
Diversification prospects remain limited. Although Azerbaijan's transport and logistics sector benefits from the higher quality of physical infrastructure compared to regional peers in the South Caucasus, as well as potential for oil and gas transit revenue from other producers in the region, the size of the sector remains too small to have a significant impact on economic growth.
Similarly, the agriculture sector is also dwarfed by the oil and gas sector, despite steady demand for Azerbaijan's food produce from large markets including Russia. The tourism sector, which had shown some potential before the coronavirus shock, may take time to recover even as borders gradually reopen.