Macroeconomic Forecast Azerbaijan

Azerbaijan posted real GDP growth of just 2.7% y-o-y over the first seven months of the year, a sharp drop off from the 16.7% expansion recorded during January-July 2008. The latest figure reinforces our core view that economic growth would slow considerably in Azerbaijan this year, though we maintain that a technical recession (as defined by negative GDP growth) is unlikely. We hold to our forecast for Azerbaijan's economy to grow by a real 3.8% in 2009, before accelerating to 9.0% growth in 2010. We expect trend growth over the long run to remain near 9.0%, lifted primarily by significant natural gas and oil output expansion.

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