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Standard & Poorâ€™s sees uncertainty in Azerbaijan economy

10 June 2009 11:56 (UTC +04:00)

BakÄ±. Vahab Rzayev â€“ APA-Economics. The deterioration of the international economic and financial situation has caused trade terms and economic growth heavily dependent on oil to slow down, according to Standard & Poor’s Ratings Servicesâ€™ first full report on Azerbaijan banking system titled "Bank Industry Risk Analysis: Azerbaijan’s Young, Fragmented Banking System Increasingly Affected By Global Crisis".

According to the report, Azerbaijan’s economy is still characterized by uncertainty chiefly arising from some geopolitical risks, as well as the insufficient development of political, legal and economic institutions, relatively low per capita GDP and large share of â€œshadow economyâ€ .

However, Standard & Poor’s foresees positive macroeconomic performance for the current and next year.

GDP growth rate is expected to increase to 5.37% in 2010 from 4.03% in 2009 and GDP per capita to $5 247 from $4 176 respectively.

	2010 (proj.)	2009 (proj.)	2008	2007	2006	2005	2004	2003
GDP (nominal, AZN billion)	36,34	28,71	38,00	26,82	18,04	12,52	8,53	7,15
GDP (billion USD)	45,43	35,89	46,58	31,23	20,19	13,24	8,68	7,28
GDP growth (%)	5,37	4,03	10,80	25,00	34,50	26,40	10,20	11,20
Population (million people)	8,66	8,59	8,53	8,51	8,41	8,32	8,19	8,11
Per capita GDP (USD)	5247,00	4176,00	5404,00	3474,00	2373,00	1592,00	1060,00	897,00
Consumer Price Index Increase (%)	7,00	5,00	20,80	16,70	8,43	9,60	6,70	2,20
Lending to Private Sector (AZN billion)	8,12	7,42	6,95	4,09	2,20	1,19	0,80	0,50
Domestic loans to private sector and public non-financial entities (AZN billion)	9,39	8,58	8,03	4,73	2,42	1,47	0,96	0,60
Net external assets of the banking sector / GDP (%)	(7,95)	(7,81)	(3,85)	(2,06)	(0,70)	1,40	1,24	1,53
Domestic loans to the private sector and public non-financial entities / GDP (%)	25,84	29,89	21,63	17,64	12,92	11,72	11,24	8,39

The report says that the negative influence of these factors is offset by a significant amount of budget and international reserves and the existence of rich oil and gas reserves that will be enough to maintain high economic growth over the medium term.

However, the banking system has low financial leverage and has a great potential to enhance the introduction of new banking products.

At year-end 2008, the aggregate outstanding loans to GDP ratio reached 19% in Azerbaijan compared to 40% in Russia and Belarus, 77% in Ukraine, 33% in Georgia and 46% in Kazakhstan.

Deposits to GDP ratio was only 11% as against Russia (35%), Kazakhstan (40%), Georgia (17%), Belarus (20%) and Ukraine (40%).