Macroeconomic Forecast Azerbaijan

BMI View: Initial balance of payments data from the National Bank of Azerbaijan (NBA) measure the current account surplus for Q106 at US$0.50bn, already almost tripling the full-year total in 2005 of US$0.17bn. The rapid improvement comes on the back of soaring oil exports so far this year, with preliminary data suggesting the trade balance will swell rapidly as the year progresses. Indeed, we forecast exports reaching US$11.8bn in 2006, compared to just US$3.8bn in 2004, driving the full-year trade surplus up to US$6.6bn. Vast new capacity for oil exports through the Baku-Tbilisi-Ceyhan pipeline will play a major role in this dramatic boost for trade, though the persistently high global prices for fuel this year are also vital. Going forward, exports should continue to boom, though rising wealth among households will prompt an accelerating demand for imports, keeping the trade surplus from reaching even higher levels. Exports, and economic growth, will continue to be heavily dependent on international oil and gas prices, thus leaving the country somewhat exposed to a major external shock.

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