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Will Azerbaijan’s economy cope with outbreak, oil crisis?

By Seymur Mammadov | chinadaily.com.cn | Updated: 2020-04-27 18:03

The Azerbaijani economy is experiencing a double blow. On the one hand, novel coronavirus, which slowed down the growth rate of some sectors of the country's economy. On the other hand, an unprecedented oil crisis, since most of the state budget revenue comes from oil, and prices for the world's main natural resource demonstrate instability. How is Azerbaijan going to deal with these two global challenges? Will the Azerbaijani economy withstand these tests? Let's try to understand these issues.

Despite the social isolation of the population due to the coronavirus pandemic and a sharp drop in oil prices on world markets, the year 2020 started well for the Azerbaijani economy, Azerbaijan's GDP in the first quarter of this year showed an increase of 1.1 percent, while the non-oil sector grew by 3.5 percent. According to the results of the first quarter, 18 percent growth was achieved in the field of information and communication technologies, with 12 percent growth in the mining industry, 3.7 percent growth in agriculture , and cargo transportation growth increased by 7.2 percent. For the first three months of this year, the state budget received more than 310 million manat ($183.3 million). That is, by the beginning of the pandemic, certain funds had already been raised in the Azerbaijani budget, which made it possible to balance the unexpectedly changed situation.

Azerbaijan, which has a powerful financial “airbag” and low public debt, did not apply to the International Monetary Fund for financial assistance, while more than 150 countries sent inquiries to the International Monetary Fund and the World Bank. Azerbaijan has strategic currency reserves at the level of 100 percent of the country's GDP, which makes it possible to restart the economy, reanimate the "frozen" sectors of the economy and even develop new programs to support all sectors of the economy as a whole.

Thanks to the consistent work carried out under the direct supervision of President Ilham Aliyev to reduce the negative impact of COVİD-19 on the national economy, macroeconomic stability is maintained in Azerbaijan, inflation is at an acceptable level of 3 percent, the situation in the foreign exchange market has significantly normalized, and the national currency rate in manat continues to remain stable amid a decline in the value of national currencies of neighboring and other countries.

In addition, the situation in the banking sector is satisfactory, credit activity continues to recover, business lending is growing and consumer loans are declining, and there is a tendency to de-dollarization of household deposits.

Even before the coronavirus pandemic, the government of Azerbaijan had several priorities, one of which is the development of the non-oil sector of the economy. And in a pandemic, the government fell under the obligation to accelerate the growth rate of the non-resource sector of the economy to overcome the crisis with minimal losses. And here is the first result - for the first quarter of this year, growth in the non-oil industry amounted to 23 percent, which illustrates that the attention paid to this sector in recent years and the investments made have had a positive effect.

Today we see that despite the coronavirus pandemic, at the moment in the agricultural sector, which forms the basis of the non-oil sector of the Azerbaijani economy, there is an increase in economic activity. For example, in the cotton growing regions of Azerbaijan, cotton has been sown. In 21 districts, it is forecasted cotton will be planted on an area of 100,000 hectares, and measures are being taken to plant other crops, such as tobacco, sugar beets, melons, vegetables, and potatoes. Serious measures have been taken to support farmers and minimize the negative effects of COVİD-19 on the agricultural sector by

Aliyev. On April 14, President Ilham Aliyev signed a decree on the allocation of funds to improve microcredit for agricultural production. According to the document, funds in the amount of 30 million manat (more than $17 million) were allocated from the Reserve Fund of the President of Azerbaijan to the Agency for Agricultural Lending and Development. The presidential decree will allow farmers to get loans without any collateral, while before the pandemic, banks demanded it in the form of an apartment.

Stable positive dynamics in the economy for the first quarter of 2020 and serious measures taken by the state to support agriculture and other sectors of the economy give reason to believe that Azerbaijan will overcome both crises (COVİD-19 and falling oil prices on world markets) with minimal losses. However, if it were not for the deep reforms in all branches of power that began in the country after the presidential election in 2018, today Azerbaijan could have faced a worst possible scenario for the development of its economy. Major personnel transformations in the presidential administration, the Cabinet of Ministers, and Parliament have further improved the mechanism of state administration, promoted the rise to power of technocrats, and young cadres, and the elimination of unprofessional, incompetent cadres. From 2018 to today, reforms have been consistently carried out, and at the moment, a rather favorable situation has developed in Azerbaijan, both in the political environment and in the economic field, as well as in resolving social problems. All these reforms, which entailed the country's prosperity, further economic growth, and an increase in the well-being of the people, were made possible thanks to the tireless work and decisive will of Aliyev, who has always put paramount importance and continues to place the interests of his people. The president’s recent order to the relevant government agencies to provide financial assistance not to 200,000 people as previously planned, but to 600,000 people due to COVİD-19, is a clear example of this.

However, to cope with the new global challenges that Azerbaijan faces, it is not enough to have a stable economy and strategic reserves in case of foreseen circumstances, but it is also very important that people trust their leader and all branches of power in the country. The strength of power lies precisely in the trust of the people. Confidence in the leader should always be at a high and stable level. Aliyev is one of the few leaders in the Muslim world to whom the trust of the Azerbaijani people is constantly growing. And since the reforms were carried out, an increase in sympathy for Aliyev has been noted in all branches of government. While confidence in some leaders is falling, in Azerbaijan, on the contrary, there is a reverse process. The measures taken by the Azerbaijani leader to combat COVİD-19, in connection with the protection of people's health, are estimated by citizens as a clear indicator of the attention and care of the head of state for the people.

The author is director of the international experts' club EurAsiaAz, and editor-in-chief of Azerbaijan's news agency Vzglyad.az.

The opinions expressed here are those of the writer and do not necessarily represent the views of China Daily and China Daily website.


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