Karabakh to support Azerbaijan's non-oil sector

Investments in Karabakh will support economic growth in the non-oil sector of the Azerbaijani economy, the forecast by international S&P Global Ratings says.

There are material gaps in economic data published by Azerbaijan's authorities. For instance, there are no volume national income accounts available broken down by expenditure. Also lacking is the international investment position data for the overall economy, APA reports.

Azerbaijan's economic growth has exhibited a stronger pattern throughout the first four months of 2024 with real GDP expanding by 4.3 per cent year on year, predominantly driven by the non-oil sector, while the oil sector contracted.

This follows a muted full-year growth performance of 1.1 per cent in 2023. Over January-April 2024 the non-oil sector grew by almost 8 per cent with an expansion of cargo and passenger transportation, information and communication services, and retail trade turnover. We also note the strong growth in the construction sector, which reflects the investments the authorities are undertaking in the captured Karabakh region. If it were not for the Karabakh-related investments, we think that implied growth in the non-oil sector would be weaker.

“We expect the non-oil sector to grow by 3 per cent-4 per cent annually over the medium term. Structural reforms and sustained economic diversification efforts have been limited, in our view, which will be an obstacle for faster growth,” S&P Global added.