Economic Analysis - Oil Slide To Usher In Period Of Slow Growth - JUNE 2015

BMI View: Azerbaijani real GDP growth will falter over the next two years due to declining prices of h ydrocarbons , which account for 95% of the country's export basket. The February 2015 devaluation of the manat will damage household purchasing power and confidence, but was necessary to preserve export competitiveness and reserves .

Macro Backdrop

Azerbaijani real GDP growth will decelerate relative to the breakneck 12.8% average growth rate achieved between 2003 and 2013, due largely to the dramatic decline in global oil prices since the beginning of H214. Hydrocarbons account for around 95.0% of Azerbaijani exports and 75.0% of government revenues. Our Oil & Gas desk forecast Brent crude, to which Azeri crude is indexed, to average just over USD60/bbl between 2015 and 2019. We expect the negative impact on growth of the reduction in oil export earnings to be compensated to a certain extent by a drawdown of hard currency reserves by state oil fund SOFAZ, and forecast headline growth of 1.6% and 1.8% in 2015 and 2016 respectively.

Slower Growth Inevitable
Azerbaijan - Real GDP Growth, % & pp Contributions

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