In May’s report, the forecast was 1.9%.
“The economic development almost in the all countries of the region is now better than previous forecast. This was caused by increase of production and export in recent months. Average volume of the export is higher than global rate. Russia and Belarus have left recession behind. However, Azerbaijan, which suffered from cheap oil price, is expected to face economic lag this year. Increase of the forecast on economic growth of the region is related to decline in unemployment rate, normalization of inflation, reduction in budget deficit”, the bank said.
According to the bank, the GDP dropped 1.3% in Azerbaijan in the first half of 2017: “This was mainly caused by decline in oil GDP. As is known, Azerbaijan has joined the OPEC agreement on output cut. In spite of the crisis in the banking sector, the non-oil sector increased 1.7%. Agriculture and processing sector played an important role in here. Annual inflation made up 13.9%, which is connected with increase of tariffs of power energy, water and gas. This factor caused price rise in the country. Taking into account the acceleration of inflation, the Central Bank of Azerbaijan went on pursuing tight monetary policy. Increase of export and decline of import in the first half caused positive balance, which is equal to 4.4% of the GDP. Despite the fact that oil output fell sharply, the oil export increased by 42%, export of non-oil products by 11%. Manat rate against dollar strengthened 4.4%”.
Bank says the problems in financial sector have negative impact on the economy: “Provision of crediting dropped 15.6%, asset quality continues to deteriorate. Share of troubled loan in loan portfolio reached 13%, while it was 9% last year. Although manat deposit in the banks increased in the second quarter, the deposit portfolio narrowed 4.4%”.
Touching upon restructuring of IBA liabilities, the World Bank noted that Azerbaijan’s public debt will increase 6% as a result of this process at the end of the year.
In spite of rise in oil price, the economy will weaken 1.4% in 2017.
According to bank’s forecast, the GDP will grow 0.9% in 2018. This will be caused by launch of Shahdeniz 2.
The World Bank forecasts 1.5% economic growth in 2019.
Moreover, bank says the inflation will be 11.2% this year, 5% and 4.9% in the next two years.