IMF: SGC pipeline to boost exports of natural gas, mitigating decline in oil production

Risks to the outlook of the Azerbaijani economy are broadly balanced, although uncertainty about the future of the pandemic remains high, Report informs referring to a report by the International Monetary Fund (IMF) following consultations with the Azerbaijani government under Article IV of the IMF’s Articles of Agreement.

“Vaccination is expected to help defeat COVID-19 and support the recovery. GDP growth is projected to pick up to 2.3 percent in 2021, as the sectors affected by stringent lockdown re-open. The new Southern Gas Corridor pipeline will boost exports of natural gas, mitigating the decline in oil production,” the IMF noted.

Following a sharp widening in 2020, the consolidated budget deficit is projected to remain high at 5.6 percent of GDP, owing to continued COVID-19 spending and increased reconstruction spending, before starting to narrow in 2022, according to IMF analysts.

Higher oil prices should improve the current account, turning it to a surplus of 2.4 percent of GDP from a small deficit in 2020, they added.

Azerbaijan faced unprecedented challenges in 2020, according to the report.

“Economic activity contracted by 4.3 percent, driven by the hydrocarbon, contact-intensive and transportation sectors. Inflation remained low, under 3 percent. Fiscal balance moved from a sizable surplus in 2019 to a large deficit, and the current account balance weakened as well. Increased health spending and a sizeable economic relief package helped save lives and livelihoods and cushion the economic impact from the pandemic and the decline in oil prices.”