Karabakh development, implementation of transport, social projects - priorities for 2023 Review by Caliber.Az

The last year has been remembered for the successful revival of the Azerbaijani economy, the increase in exports and the growth of foreign exchange earnings, and this positive situation has been achieved amid global crises and high inflation. Despite the global recession and other negative changes in the world associated with the tense geopolitical situation, the progressive development of the domestic economy as a whole will continue this year. Such conclusions can be drawn proceeding from the government’s activity last year, mentioned in the recent report of Azerbaijani Prime Minister Ali Asadov to the country's parliament.

“Economic growth in Azerbaijan continued despite the negative changes in the global economy last year associated with global geopolitical tension and the Russian-Ukrainian war. The nominal gross domestic product (GDP) of the country in 2022 reached 133.8 billion manats ($78.7 billion). At the same time, the past year was remembered for reforms in all spheres of public life,” the Azerbaijani prime minister said, while delivering a report on the activity of the government in 2022 at the plenary meeting of the Azerbaijani parliament on March 17.

According to the Azerbaijani State Customs Committee, foreign trade greatly increased, reaching $53 billion, while the trade surplus reached $24 billion. Last year was remembered for the unprecedented growth in exports of non-oil products. Its volumes reached $2.992 billion, which is 10.3 per cent more than in 2021. Moreover, high prices and tangible external demand for energy last year contributed to the increase in revenues from the export of Azerbaijani oil and gas. In particular, according to the State Customs Committee, the value of the registered gas exports from Azerbaijan exceeded $14.989 billion, ensuring a 2.7-fold increase compared to the previous year.

In turn, the average price for benchmark Brent crude oil (the domestic grade of Azeri Light oil is connected with it) in 2022 amounted to $100.94 per barrel compared to the average price for it a year earlier - $71 per barrel, thereby profitability increased by 42 per cent.

Taking into account the premium for Azerbaijani light oil, this figure is even slightly higher. The average global cost of hydrocarbons was rather higher than the forecast oil cut-off price ($70 per barrel of Brent) in Azerbaijan's last year's budget, and this difference was regularly accumulated in the country's reserve funds.

The country’s strategic foreign exchange reserves are created from the reserves of the Central Bank of Azerbaijan, the assets of the State Oil Fund of the Azerbaijan Republic (SOFAZ) and treasury funds of the Azerbaijani Ministry of Finance.

The main volume of reserves, about 85.5 per cent, is accumulated in SOFAZ, the Central Bank also has the biggest volume of reserves. Last year it showed record levels of reserves. One of the noteworthy achievements of the past year was a 9.3 per cent increase in Azerbaijan's total gold and foreign exchange reserves. The increased profitability from oil and gas exports, the high level of the balance of payments and trade surplus made it possible to greatly increase the country's financial safety cushion.

"Azerbaijan's foreign exchange reserves reached $62.5 billion in 2022 and increased by $5.3 billion over the year," Asadov said.

The prime minister also stressed that Azerbaijan's foreign exchange reserves today exceed the country's external debt by eight times.

At the same time, the country's total external debt was reduced to $6.7 billion, or by 9.5 per cent in 2022, and today it reaches only 8.5 per cent of GDP.

Thus, the foreign trade surplus, the growth of the budget revenues and the gold and foreign exchange reserves, as well as a decrease in the state debt on external obligations, became a solid basis for the progressive socio-economic development of the country last year.

The prime minister noted that in particular, the income of big state-owned companies transferred to the management of the Azerbaijan Investment Holding greatly increased in 2022.

“Improvement of the efficiency of companies transferred under the Azerbaijan Investment Holding’s management increased their income by 52 per cent, while Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by 85 per cent. At present, 8 out of 12 big state-owned companies have the potential to pay dividends,” Asadov stressed.

All these factors have a high multiplier effect and continue to have a positive impact on the country’s economic stability in the current year.

Despite a slight decline in industrial production in the commodity sector, mainly due to a decline in oil production and exports, positive trends are observed in other spheres of the energy industry.

Thus, gas production in Azerbaijan in January-February 2023 amounted to 8.8 billion cubic metres, increasing by 4.2 per cent while gas exports from the Shah Deniz field during the reporting period increased by 10.1 per cent year-on-year, reaching 3.601 billion cubic metres.

Azerbaijan has gained the status of the region's leading exporter of electricity since last year, and this trend will further intensify in the current and next years.

The most important thing is that Azerbaijan has successfully used the positive effect of a favourable external environment and the growth of income from the export of energy resources in transport projects that are currently being implemented, for example, the expansion of the international port in Alat, the modernisation of the Baku-Tbilisi-Kars railway corridor, accelerating the restoration of the infrastructure of the Karabakh and East Zangezur economic regions of Azerbaijan.

“In this context, the opening of new international and regional transport and logistics corridors is of great importance, in particular, the construction of the transport and energy infrastructure of the Zangezur corridor on the territory of our country,” Asadov mentioned in the report.

He also reminded that design and construction of 19 highways stretching 2,241 km and an international airport in Lachin were underway in the territories liberated from occupation, and 11 hydroelectric power plants were built last year.

“A total of 18 industrial enterprises have been registered in the Aghdam Industrial Park and the Araz Valley Economic Zone Industrial Park, and a total of about 106 million manats ($62.3 million) is expected to be invested in the implementation of projects by creating over 800 new jobs,” the prime minister noted, reminding about preparation for work within the “First State Programme of the Great Return to the Territories Liberated from Occupation”, approved upon the president’s order on November 16, 2022.

The process of implementing the Great Return programme began in May 2022 with the implementation of the first stage of the smart villages project. Some 66 families (326 people) were resettled in Agali village of Zangilan district till late 2022 while to date - 86 families (420 people).

“The first group of Lachin residents is planned to be resettled till late 2023. Some 296 families will settle in Zabukh and Sus villages. The first 20 families are being resettled in Talish village of the Tartar district these days,” he noted.

The big foreign exchange reserves accumulated last year will help the country not to slow down on important projects of national importance. All undertakings for the development of the Karabakh region, the implementation of transport projects, and support for the non-oil sector of the economy will continue in 2023.

The work on the budget expenditures will be continued this year within the important decisions taken last year at the initiative of the president that strengthened the social protection of the population, namely, an increase in salaries, pensions, social benefits and payments to low-income layers of the population.

“In general, 750 million manats ($441 million) will be additionally allocated to increase salaries and social benefits in 2023. This will cover 1.9 million citizens,” the prime minister added.