As countries across Europe and Central Asia continue to face challenging economic headwinds, the eastern part of the region in particular is being impacted by the collapse of oil revenues and the associated decline in remittances. Azerbaijan, in the South Caucasus, is one of the countries most affected.
Economic growth in Azerbaijan slowed in the second half of 2015, affected by the continued plunge in oil prices and reduced public investment, which then depressed construction activity. Inflation soared as a result of large manat devaluations, raising concerns about new social vulnerabilities.
With oil prices forecast to remain low, Azerbaijan’s growth and fiscal position are likely to weaken further in 2016, posing significant risks. Financial sector vulnerabilities and an underdeveloped macroeconomic policy framework are further adding to the country’s challenges.
Against this backdrop of adverse economic developments, World Bank Chief Economist for Europe and Central Asia, Hans Timmer, visited Baku in May, 2016. The main objective of Timmer’s visit was to present and discuss the recent Regional Economic Update, Impact of China on Europe and Central Asia.
This two-chapter report provides a macroeconomic outlook for Europe and Central Asia, followed by an in-depth analysis of the impact of China’s economic rebalancing on the region. Unsurprisingly, the report and the presentation elicited strong interest from Azerbaijan’s government, academia, and civil society.