Economic reforms and rapid development

Since the beginning of the XXI century Azerbaijan has become most dynamically developing country of the region and post-Soviet space from economic point of view. From one side realization of projects allowing transporting of rich oil and gas resources of the country to global markets and as a result rapid increase of revenues of Azerbaijan and from other side implementation of steady reforms aimed at effective management of the revenues and diversification of the economy in very short time gave its yields. Azerbaijani economy had grown for last few years about 300 percent, i.e. increased by 3 times. The volume of foreign currency reserves of the country, according to data by the beginning of 2012 exceeded 40 billion dollars. At the same time, the share of non-oil sector of the economy has grown continuously and the risk of dependence of the economy of Azerbaijan on oil was eliminated. The predictions made by many local and foreign experts about Dutch disease in the economy of Azerbaijan after the start of inflow of the large oil revenues were not proved. At present, Azerbaijan turned to the country investing large investments in the region and outside from the country in need of foreign investment.  

According to State Statistics Committee data on macroeconomic indicators during 1995-2003 an average annual growth of GDP during the period was between 9 percent and per capita GDP was increased 3 times, and the average monthly salary by 5.3 times. Foreign investment was increased in 10 times, the domestic investments 5 times, budget revenues increased by 3 times, the budget deficit decreased to the minimum limit. The private sector share in GDP up to 2003 was increased by 73 percent. 

According to official statistics in 2004-2011 the GDP was increased an average 14 per cent, as well as for the non-oil sector the GDP was increased by 9 percent. During this period, per capita GDP in the country increased 5 times, and the private sector share in GDP increased by 81.7 percent. The ratio of foreign debt to GDP fell to 7 percent from 18 percent in 2003. Strategic foreign exchange reserves exceeded 40 billion dollars, and it is 8 times more than the volume of foreign debt. During this period, the investment in Azerbaijan increased by 2.4 times, 1.5 per cent of them are foreign and 5.5 percent interior investments. At that time every year, the budget revenues on average increased 24 percent, the budget deficit is currently at a level below of 1 percent. Also on the last two years the GDP growth trend of non-oil sector observed in relation to GDP of oil sector. The president of the country has repeatedly emphasized the protection of this tendency in his speeches and put it in front of the government as a strategic task.

Just thanks to economic reforms carried out in parallel with receiving by the country the large oil revenues, the effective management of oil revenues and its diverting Azerbaijan became one of the leaders of the world for the annual growth rate of GDP in 2005-2007 years: the country demonstrated 26.4 percent GDP growth in 2005, a record 34.5 percent in 2006, and 25 percent in 2007. In 2008, despite the global financial and economic crisis, very few countries, Azerbaijan\'s economy was one of few economies, which not stagnated. At that year 10.8 per cent growth in GDP was recorded.

The tendency of continuous growth in the economy of Azerbaijan, with full launching of Baku-Tbilisi-Ceyhan main export oil pipeline in July 2006 led to rapid development together with large oil revenues. At that time after launching of this pipeline allowing transporting of daily 1 million barrel of oil to global markets the question of effective management of large oil revenues coming in Azerbaijan arisen before the country. Economic reforms started by Azerbaijani President Ilham Aliyev even before receiving the huge oil revenues in country in relation to development of the non-oil sector, medium and small businesses, regions and agriculture (the state programs in the relevant areas, the president\'s orders and decrees), programs aimed at diversification of the economy allowed to settle this issue successfully. Azerbaijan could in a short period of time, just in a few years, minimize dependence of the economy on the oil revenues, and from one hand the rapid growth of the country\'s economy took place, and on the other hand programs  have been implemented for the non-oil sector development, economic liberalization, small and medium business support, development of the regions. For this purpose, the head of state has issued in succession decrees and orders aimed at the development of non-oil sector, and laws and decisions were adopted.

The economic reforms carried out in Azerbaijan, a successful economic policy aimed at the development of non-oil sector was noted by influential international organizations. In 2009, Azerbaijan was recognized as one of the countries, achieved most successful results in business among the world countries according to Doing Business ranking prepared each year by the World Bank and the International Finance Corporation.  Azerbaijan gained significant growth on 7 points from 10 key points prepared in the report and compared to the Doing Business 2008 report in Doing Business-2009 the country improved its position at an unprecedented pace in relation to other states. According to the report Azerbaijan was a leader among the countries carrying out economic reforms.

Azerbaijan is one of the leading countries among former Soviet republic in competitive rating covering economy of the world\'s 142 countries prepared by prestigious institutions in the world -  the World Economic Forum (WEF - World Economic Forum) for the years 2011 to 2012. In this rating Azerbaijan went ahead for 2 points compared to 2010 and took the 55th row, and among the former Soviet republics  it is 3rd position after Estonia and Lithuania and 1st among the CIS countries and countries of the region. The World Economic Forum studies the competitive rating of the countries on perfectness of market institutions, infrastructure development, macroeconomic stability, technological development, the level of education and public health and on other criteria.

The country\'s leadership having successfully  implemented the deliberate strategy aimed at establishment of economy on  the development of the non-oil sector  carries out the  policy aimed at  deliberately keeping oil production on stable rates, thus preserving resources for future generations, instead, further accelerating the rate of non-oil sector development.   President of Azerbaijan put the task before the government at the beginning of 2012 to double the increase in GDP during future 10 years. This increase should be provided by the non-oil sector. According to projections for the next 3 years the GDP growth of non-oil sector will average make 8 percent per year. Successful economic policy aimed at diversification of the economy will result in decreasing of share of the oil sector in GDP in 2015 for 29.3 percent compared to 48.5 percent in 2010. As a result, the share of non-oil sector in GDP will reach 61,3 percent in 2015 from 44,4 percent.  Today Azerbaijan\'s economy as a whole comprises 75-80 per cent of the economy of the South Caucasus.

Along with rapid economic development in Azerbaijan the country\'s strategic currency reserves has also increased. According to the figures for January 2012, the official foreign exchange reserves at the disposal of the Central Bank is close to $11 billion. According to forecasts for 2012 these reserves will increase over the $ 3 billion. Together with resources of the State Oil Fund Azerbaijan\'s strategic currency reserves reaches 42 billion dollars. Currency reserves of the country expected to reach USD 100 billion over the next 10 years.

The volume of investments made in Azerbaijan\'s economy in the last 15 years makes more than 100 billion dollars. The important part of it makes the domestic investment. However, today Azerbaijan is a country making large investments outside the country. At the same time, Azerbaijan is becoming the lender country from the borrower country. For last few years Azerbaijan had made large investments on both state and private sector lines in some countries like Russia, Belarus, Ukraine, Moldova, Georgia and Turkey.

Large investments in abroad are made mainly by the SOCAR – State Oil Company of Azerbaijan Republic.  Investments made by Azerbaijani entrepreneurs just in Turkey comprise 5 billion dollars. Presently SOCAR makes large investments in this country in billion dollars.    Azerbaijan is one of the countries making most investment in the neighbouring country Georgia and has a leading position in this country\'s energy, oil and gas sector. For example, the retail sale of oil products in Georgian market is currently 75 percent under the control of SOCAR. And share in gas sales market reaches 90 percent.

The geography of the countries of investing by Azerbaijan is expanding rapidly. Through the SOCAR line large investments are made in Switzerland, the United Arab Emirates, Kyrgyzstan. In addition, the private sector also goes to occupy its position in construction, tourism, real estate markets of the Eastern Europe, Western Europe and the countries of the Balkan Peninsula. In recent years Azerbaijan had allotted large loans to the countries of region with its strategic and economic interests. As a result of all this economic success Azerbaijan reinforces its position of leader in the region, at the same time it becomes influential country outside the region. Thanks to its strong economy Azerbaijan presently is one of the important countries connecting the Europe and Asia, the corridor of Great Silk Road.