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OFFICIAL USE Azerbaijan – Challenges and Opportunities 11 May 2016
OFFICIAL USE
Azerbaijan – Challenges and Opportunities 11 May 2016
AZERBAIJAN
OFFICIAL USE Sources: national statistical authorities
26.4%
34.5%
25.0%
10.8% 5.0%
0.1% 2.2%
5.8% 2.8%
1.1%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
10
20
30
40
50
60
70
80
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
US
$ bn
GDP trends Nominal GDP, US$ bn Real growth, % yoy
10.0% 7.0%
1.1%
1.0% -2.9%
1.1% -10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-10
0
10
20
30
40
50
60
70
80
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
US
$ bn
Oil vs. non-Oil GDP Oil GDP, US$ bn Non-oil GDP, US$ bnNon-oil GDP growth, % yoy Oil GDP growth, % yoy
Household consumption
45.0%
Government consumption
10.8%
Gross fixed capital formation
27.2%
Changes in inventories
0.1%
Net exports 16.9%
GDP composition (2014)
Household consumption
55.8%
Government consumption
12.5%
Gross fixed capital formation
28.6%
Changes in inventories
0.1%
Net exports 3.0%
GDP composition (2015)
AZERBAIJAN
OFFICIAL USE
Export 1995 Export 2014 Export 2015
Sources: Central Bank of Azerbaijan, State Statistical Committee of Azerbaijan, IMF WEO (April
2016), Atlas of Economic Complexity (CID, Harvard University), Nasdaq.
Non-oil export 14%
Oil export 86%
11.6%
4.8%
1.5% 2.8%
-3.4%
-12.5%
26.5%
21.5%
16.4% 13.9%
-0.4% -0.2%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2011 2012 2013 2014 2015e. 2016f.
External and fiscal balances
Gen. gov't balance, % of GDP Current account, % of GDP
In US$ terms, CA
receipts from
oil/gas sector
declined by 45%
yoy in 2015
10.5
11.7
14.2
15.2
13.8
12.7
11.0
9.5
8.4
8.4
8.5
8.5
7.3
7.0
6.8
6.2
5.0
4.4
4.0
4.1
0
2
4
6
8
10
12
14
16
2011
2012
2013
Jun-
14
Dec
-14
Jan-
15
Feb
-15
Mar
-15
Apr
-15
May
-15
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16
Feb
-16
Mar
-16
US
$ bi
llion
Official reserve assets of the CBA
Portfolio: Sector Breakdown Annual Bank Investment and Operations
As of 31 March, 2016
Manufacturing
& Services,
10%
Cumulative investments in to Azerbaijan amount to EUR 2.5 billion with 162 signed projects.
The total portfolio in Azerbaijan reached EUR 1.0 billion with active portfolio projects reaching 60.
Private share of portfolio is 73.1%
Manufacturing
& Services,
12%
Agribusiness
6%
EBRD Operational Track Record in Azerbaijan
OFFICIAL USE
Azerbaijan: Key Transition Results and
Implementation Challenges #1
Country Strategy
Priorities Key Transition Results
Implementation
Challenges Way forward
1. Promoting
market-driven
economic
diversification
Helped expand capacity and
productivity of clients in M&S and
agribusiness private sector
Contributed to increase in turnover
and employment of ASB clients
Increased operational risk
as devaluations of the
manat (50 per cent in
2015) hit the non-oil
private sector.
Broaden access to LCY
Provide critical working capital
and debt restructuring
support to clients
2. Developing a
sustainable
financial sector
to support
private sector
development
Stimulated MSME lending,
particularly in underserved
regions, and introduced new
products such as EE credit lines
Contributed to decrease of
historical dominance of IBA
Large increase in NPLs,
interest rates caps on
MSME lending and
restricted manat
availability
Support consolidation of the
banking sector.
Support NPL resolution policy
with other IFIs
Until recently, the absence of reform appetite made it difficult to progress on country-level strategic
objective, despite successful projects and EBRD being the largest investor
in the non-oil private sector…
OFFICIAL USE
Azerbaijan: Key Transition Results and
Implementation Challenges #2
Country Strategy
Priorities
Key Transition
Results
Implementation
Challenges Way forward
3. Improving
governance and
the business
environment
Promoted
increased
transparency
levels among
corporate clients
(several clients
adopted IFRS
accounts)
Until recent decrease
in oil prices, no sense
of urgency on need
for reforms
Slow progress in
transport reform
affected
disbursement of
$750m regional
roads programme
Leverage momentum and encourage the authorities
renewed reform efforts in improving investment climate
(e.g., customs, export and permits licensing).
Stand ready to support privatisation programme
Support transport projects with regional significance to
reignite governance reforms:
o subject to progress on road sector funding and private
involvement in maintenance, explore re-allocation of
$500m from $750m regional roads reconstruction
programme, to finance widening of Ganje - Georgian
border highway – part of the EU-TRACECA corridor.
o Seek to support modernisation of Azeri Railways through
a comprehensive restructuring programme.
Seek opportunities to support Southern Gas Corridor
project, enabling regional energy market development and
expansion of export opportunities for Azerbaijan, as well as
cooperation with the government on public procurement
reform and re-compliance with EITI principles1
…. however, the low oil price is now creating incentives for deep reforms, and the Government is
taking the opportunity of the crisis to introduce significant reforms
in the investment climate and infrastructure sector
1. Azerbaijan Country Strategy 2014-2018 | Priority 3 Improving governance and the business environment:“The Bank will support projects of regional
significance that enhance regional trade via diversification of hydrocarbon export routes and which favour regional integration ofenergyinfrastructures” OFFICIAL USE
Case study 1
Veysaloglu Group (Ulduz) Producer of chocolate and importer of a wide range of food products and soft drinks. EBRD provided US$ 9 million financing to support the company’s expansion. The chocolate brand “Ulduz” is one of the best known in Azerbaijan. EBRD financing enabled the company to increase its production capacity and expand its current product range with three new confectionary manufacturing lines for Azerbaijani and foreign consumers.
OFFICIAL USE
Case study 2
EBRD signed a €4.6 million loan agreement with Gedebey Mineral Sulari, one of the leading bottled water producers in Azerbaijan. The funds were used to purchase new equipment to increase the company’s production capacity, in order to respond to fast-growing product demand and to strengthen its distribution.
Slavyanka
OFFICIAL USE
Layouts for charts,
images, tables, smart
art or video
18 May, 2016 OFFICIAL USE 9
18/05/2016
Thank You
Neil McKain
Head of Resident Office
EBRD Azerbaijan
OFFICIAL USE OFFICIAL USE
