Transcript GOAJ Response

AZERBAIJAN:
ECONOMIC IMPACT AND
RESPONSE TO THE GLOBAL
ECONOMIC CRISIS
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PRESENTATION OVERVIEW
 IMPACT OF THE CRISIS ON AZERBAIJAN
 GOAJ RESPONSE
 USAID RESPONSE
2
Country Background
• Highest GDP growth rates in the world in recent
years:
 2006 - 30.5%
 2007 - 23.4%
 2008 – 11.6%
• Primary Engine: Oil, Oil, Oil!.....but strong growth
from non-oil sector as well
• Official reserves exceeded $5 billion in May
As a major oil producer, Azerbaijan is in better condition to withstand the crisis
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Country Background
• Ironically, Azerbaijan also shielded from full
impact of crisis because:
 its underdeveloped capital markets
 low dependency of domestic banks on "hot"
capital inflows
• Despite strong position, no country is immune:
 growth will slow down significantly in 2009 to 4-6%
 unorthodox revenue collections, threatening businesses
 liquidity impact affecting international loans and liquidity
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GOAJ Response
• Azerbaijan National Bank (Central Bank) took
following steps since August 2008:
 Reduced reserve requirements from 12% to 0.5%;
 Lowered discount rate from 15% to 3%
 Provided liquidity to a few banks that were
beginning to experience difficulties
 Made strong statements that it is ready to assist
banks facing short-term liquidity problems
 Ministry of Finance injected additional capital in the
largest state-owned bank, thus increasing system
liquidity
GOAJ hopes that these steps that will support banks and limit the need for
a sharp contraction in the availability of credit for the domestic economy.
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USAID Response
• Under Trade and Investment Reform Project, developed
partial equilibrium economic model to assess impact on
economic variables on overall economy. Based on model,
provided assistance to GOAJ to assess impact of tax
revenues and most effective responses
• Public Expenditure Program assisting GOAJ on
evaluating public expenditure priorities, critical at a time
of revenue short falls
• Financial Stability Program assisting participating banks
on risk management
• Private Sector Competitiveness Enhancement Program
working with participating banks in new trade finance loan
products to more specifically meet SME demands
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