Infrastructure investments in liberated Karabakh are projected to reach 2.2% of Azerbaijan's GDP, according to Fitch Ratings.
Fitch Ratings forecasts 2.1% growth of Azerbaijan’s GDP in 2021 and 2.9% in 2022, below the projected 'BB' median of 4.2% growth, Report. az informs, citing the agency.
In 2020, the country’s GDP contracted 4.3%.
Fitch expects oil and gas production capacity to be broadly flat in 2022 (as maturing oil extraction is offset by growth in the gas sector) and to gradually decline thereafter. Fitch anticipates there will be only limited reform progress, and that structural rigidities and impediments to competition will constrain faster growth in non-oil FDI inflows and in economic diversification.
Fitch forecasts the current account returns to surplus, of 5.9% of GDP in 2021 and 4.7% in 2022 (following a 9.6pp deterioration in 2020 to a deficit of 0.5% of GDP), largely reflecting the higher oil price. Net FDI is also projected to recover to average 1.7% of GDP in 2021-2022.
Fitch forecasts the general government deficit narrows from 6.5% of GDP in 2020, to 0.2% in 2021 and 0.7% in 2022 (which compares favourably with the 'BB' medians of 5.2% and 3.6%).
“This is driven by strong revenue growth due to the higher oil price and to a lesser extent, a gradual rise in OPEC plus production quotas and the recovery in non-oil GDP (with budgeted SOFAZ transfers unchanged on 2020). We assume additional expenditure on the reclaimed territories totals 1.9% of GDP in 2021 and 2.2% of GDP in 2022, and that the large majority of the Covid-19 support package (totalling near 2.4% of GDP in 2020) is unwound by 2H21,” Fitch added.
