Finance

Finance

ADB: Central government deficit is projected to widen in Azerbaijan

06 April 2022 11:48 (UTC +04:00)

Fiscal policy is expected to remain expansionary in 2022 but less so in 2023, APA-Economics reports citing Asian Development Outlook 2022 report.

The central government deficit is projected to widen to equal 3.1% of GDP in 2022 before narrowing to 1.5% in 2023, with revenue rising slightly in nominal terms but falling to 28.1% billion, reflecting both higher oil prices and plans for smaller transfers from SOFAZ to the government budget (Figure 3.2.10).

Fiscal policy is expected to remain expansionary in 2022 but less so in 2023. The central government deficit is projected to widen to equal 3.1% of GDP in 2022 before narrowing to 1.5% in 2023, with revenue rising slightly in nominal terms but falling to 28.1% of GDP in 2022 and 27.6% in 2023 as nominal GDP growth again outpaces revenue. Transfers from SOFAZ are expected to rise by 12.0% in 2022 to compensate for lower tax revenue, providing half of all revenue, and decline by 9.5% in 2023 following the adoption of new fiscal rules. Expenditure is forecast rising to equal 31.3% of GDP in 2022 as the government introduces a $3.0 billion package to support economic activity, including investment plans to reconstruct Karabakh, then decline to 29.2% of GDP in 2023. The authorities may revisit the budget in mid-2022 to increase outlays for investment. Public and publicly guaranteed debt should increase to 19.3% of GDP in 2022, largely from the domestic market to finance budget deficit and decline to 18.8% in 2023 in line with the government’s debt management strategy, with external borrowing and sovereign guarantees held to $800 million in 2022.