Socio-economic indicators and inflation Years 2007 2008 2009 2010

GDP, mln.AZNGrowth rate, %

28360,525,0

40137,210,8

34578,79,3

416005.0

GDP per capita, $ 3474 5603 4874,1 5797,8

Oil GDP, growth rate, % 36,8 6,8 14,3 1,8

Non-oil GDP, growth rate, %

11,4 15,9 3,2 7,9

Inflation, % Average yearly 16,7 20,8 1,5 5,7

Income of population, growth rate, %

40,3 37,8 8,0 13.3

Average monthly wage, AZN

growth rate, %

214,042,0

274,424,2

298,08,6

3259.1

Nominal GDP capacity and growth rate

3,80%

26,40% 25%

10,80%9,30%

5%

34,50%

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2005 2006 2007 2008 2009 2010 2011

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

GDP capacity (mln.manat) GDP growth rate (%)

2005-2008 2009-2010

GDP growth rate , % 24.2% 7.2%

Oil sector growth rate , % 42.9% 8.3%

Non-oil sector growth rate , % 11.8% 5.6%

CPI, % 13.9% 3.6%

Growth rate of nominal incomes, % 31.8% 10.7%

Growth rate of nominal wage, % 27.0% 8.9%

Growth rate of budget expenditure, % 64.3% 6.8%

Growth rate of bank activities , % 65% 14%

Share of GDP utilization in the GDP (%)

-20%

0%

20%

40%

60%

80%

100%

19971998

19992000

20012002

20032004

20052006

20072008

20092010

Last consumption General collected Net export Statistical difference

6

Inflation and non-oil GDPInflation and non-oil GDP

7

The growth rate of salary in oil and non-oil sectors

Average monthly salary in oil and non-oil sectors (AZN)

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014

Oil Non-oil

Azərbaycanda rəsmi yoxsulluq səviyyəsi (%)

46.70%

11%13.20%

9.10%

15.80%

21%

40.20%

29.30%

44.70%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

8

The poverty level, in percent The poverty level, in percent

9

Multidimensional Poverty Index, MPIMultidimensional Poverty Index, MPI 0.0210.021

Poverty rate on MPI Poverty rate on MPI 5.4%5.4%

The number of population on MPI, mln., personThe number of population on MPI, mln., person 0.50.5

Poverty on income Poverty on income (1.25 $(1.25 $ per day per day)) 2%2%

Poverty on income Poverty on income (2 $(2 $ per day per day)) 2%2%

Official poverty level Official poverty level (2010)(2010) 9.1%9.1%

Population Population ((mln.mln., 2010), 2010) 9.19.1

HDI, 2010HDI, 2010 0.7870.787

104 ölkə arasında104 ölkə arasında 6666

HDI HDI status status orta (medium)orta (medium)

Multidimensional Poverty Multidimensional Poverty IndexIndex

De-industrialization trend in the composition of GDP (over sectors, %)

9,20%

7,10%

6,50%

6,70%

6,80%

6,80%

6,80%

6,50%

49,40%

57,30%

59,50%

58,50%

50,00%

52,60%

45,30%

43%

41,00%

41,00%

9,40%

7,70%

6,70%

7,00%

7,40%

7,50%

9,00%

8,80%

8,80%

8,60%

24,40%

22,40%

21%

22%

28%

27,40%

31%

32,80%

34,70%

35,20%

7,60%

5,50%

6,60%

6,70%

7,60%

7,10%

8,10%

8,40%

8,70%

8,70%

5,40%

5,60%

0% 20% 40% 60% 80% 100%

2005

2006

2007

2008

2009

2010

2011(p)

2012 (p)

2013 (p)

2014 (p)

agriculture industry construction services net taxes

Years 2003 2007 2008 2009 2010

Incomes of state budget, mln.AZNGrowth rate, %

1220,9

34,1

6007,3

55

10763,0

79,2

10325,9

-4,1

11 402,5

10,4

Oil incomes, mln.AZNGrowth rate, %

470

35,8

3564

58

7299,6

104,8

6897

-5,5

71774,5

Non-oil incomes, mln.AZNGrowth rate, %

751

32,9

2443,3

51

3463,4

41,8

3429,0

-1,0

422323,1

State budget expenditure , mln.AZNGrowth rate, %

1235

32,5

6058,7

6,0

10680,0

76,3

10567,0

-1,9

11 766,0

12

Including investment expenditure, mln.AZNGrowth rate, %

90 1915

2,2 times

4276,0

2,1 times

3177,0

-25,7

4 147,016,3

1. Considering the risk of continuing growth rate of the economy after 2011, the procyclic macroeconomic policy should be replaced with the sustainable economic development-based macro-economic policy; in addition, dependence of the economic growth rate on crude oil prices should be gradually neutralized;

2. Problems in GDP structure, specifically the risks of determining role of consupmtion and capital accumulation should be considered in macroeconomic policy;

3. Particular strategy should be developed for the development of the agricultural sector and non-oil industry and the control over the implementation of state programs should be accelerated;

4. Business and investment climate should be developed in order to further increase the share of non-oil sector in investments and the GDP; 

5. New phase of government assistance to entrepreneurship should be launched to Qeyri-neft ixrac potensialını və vergitutma bazasını genişləndirmək üçün sahibkarlığa dövlət köməyinin yeni mərhələsi başlanılmalı;

6. Addressed “agitation” policy should be realized to decrease the salaries difference between the economic sectors (for example, application of alleviated tax and social payment rates for the entities in the non-oil sector where salaries are lower than in the oil sector);

7. Improvement of the national accounting system and statistics on macroeconomic indicators and poverty;

8. Permanent and unchangable incomes approach should be applied to the oil revenue expenditures, as envisaged in the “Long-term strategy on oil and gas revenue management”;

9. Financial policy directive, based on solid foundations, should be adopted on “Fund-budget” relations münasibətləri and transfers from SOFAZ should be limited to particular amount of its assets;

10. Azerbaijani government should add a stronger strategic composition to the budget and align the fiscal policy with the strategcy and programs related to the medium and long-term development of the country;

11. Structural reforms should be undertaken in the state management, decentralization policy should be expanded and financial independence given to the health and educational institutions in the first place in the frame of fiscal decentralization reforms in Azerbaijan;

12. Classification of expenditures on paragraphs, articles and items subject to ammendments according to the decision of the Cabinet of Ministers on approval of the “Unified budget classification of Azerbaijan Republic” should be complied with the real needs;

13. Tax administration should be improved to increase the coefficient of direct tax incomes collection in provision of state budget incomes; regulative and stimulating, aside from fiscal functions of the taxes, should be strengthened and the sources of tax debts emergence researched.

14. The budget deficit, along with the other fiscal parameters, should also be forecasted for the medium term period at the level, not harmful for the macroeconomic stability and the sources of its coverage be complied with the general fiscal policy;

15. Considering that the increase of state expenditures is among the factors seriously affecting the inflation, it is important that they grow in tact with absorption capacity of the economy. Thus, the absorption capacity of the economy should be considered in budget increases, alongside with the principle of stability;

16. Competitiveness in the bank sektor should be increased, power concentration decreased and administrative distortion eliminated in the credit market to manage the growing risks in the bank sector and prevent the possible crisis.

Gubad Ibadoglu: gubad.ibadoglu@gmail.com Kenan Aslanli: kenan.aslanli@yahoo.com

Sohrab Farhadov: sohrabfarhadov@yahoo.com

National Budget GroupBaki, Azerbaijan AZ 1065

44, Jafar Jabbarli str., Caspian Plaza 3, floor 9Phone: (+99412) 437 18 20

E-mail: office@nbg.az

www.nbg.azwww.budget.az