AZERBAIJAN, a small country located in South-West Asia, adopted a policy of deregulation and privatised 99 per cent of its agricultural sector after its independence.

Agriculture contributes nearly six per cent to the GDP and employs 37pc of the workforce. The share of the GDP in the agricultural sector has been decreasing annually in favour of the industry and services sectors.

The main crops are wheat, barley, corn, potatoes, cotton, tea, silk, tobacco and fruits. However, productivity remains low due to the lack of modernisation.

The industry sector accounts for 51.7pc of the GDP and employs 14pc of the workforce. Services, which have been steadily increasing their share in the GDP, contribute 42.3pc of the GDP and employ 49pc of the active population.

The flourishing economic sectors are banking, construction and real estate. The main industrial sectors of the country are gas, oil and its by-products: steel, iron, chemical and petro-chemical products and textile.

Azerbaijan in Southern Caucasus has become a key economic player due to its great oil and natural gas reserves. Oil and gas account for about three-quarters of Azerbaijan’s state revenues and 45pc of GDP.

The entire country has been able to modernise, rapidly transforming itself into an upper-middle-income country, possibly because of the huge revenues from the oil business. The last 15 years marked a paradigm shift in the economic, social, political, and cultural development of the country.

In spite of a poverty rate of above 50pc, Azerbaijan is not a poor country. Its GDP per-capita is above $18,179, rich enough to provide its nation whatever it needs for the next century. But the majority of wealth is in the hands of a bunch of people who do not respect the government and law.

Corruption remains widespread. Over the recent years the economy of the country has more than tripled in size. The rapid economic development can be attributed to the exploitation of hydrocarbon resources.

With ample natural resources in the hydrocarbon sector, Azerbaijan is highly dependent on mineral products. According to the World Bank, Azerbaijan’s GDP halved from around $74.2billion in 2014 to just under $37bn in 2016.

The economy had a modest recovery in 2017 as a favourable external environment supported non-oil economic growth, but this was offset by a decline in oil production. The non-oil sector rebounded by 2.7pc, supported by benign public financing, stronger external demand, and improved confidence in response to recovering oil prices but oil GDP contracted by five per cent despite higher oil prices.

The World Bank expects significant growth in the next two years. GDP will grow by 1.8pc in 2018 and 3.8pc in 2019. The IMF economic growth projects GDP to grow two per cent in 2018 and 3.9pc in 2019.

The country is facing a number of challenges, including rising inflation and especially its excessive dependence on the oil and gas sectors, which represent 88pc of exports and 52pc of fiscal revenues.

Though the country’s financial situation remains in good condition due to the large assets accumulated by the Oil Fund (SOFAZ), gross external debt rose from 16pc of GDP in 2014 to 39pc in 2016 and is estimated at 55pc at end-2017.

Afghanistan

AFGHANISTAN, a deeply fragile and conflict-affected country, has been one of the most prosperous countries in the world owing to its vibrant trade with India, Bangladesh and beyond

The country, endowed with a wealth of natural resources, including extensive deposits of natural gas, petroleum, coal, marble, gold, copper, chromite, talc, barites, sulphur, lead, zinc, iron ore, salt, precious and semi-precious stones and many rare earth elements, went from a traditional economy to a centrally-planned economy.

Estimates of Afghanistan’s natural resources range from $1trillion to $3tr. The copper deposit is said to be the world’s second largest unexploited deposit consisting of up to 13m tonnes. There are an estimated 1.8bn tonnes of iron-ore.

Energy is one of the government’s priority sectors and a foundation for economic growth. Estimated oil reserves amount to 87m barrels over the 25-year contract period which will provide the government with an income of $7bn.

But industries have either been ruined during the civil war in the 1990s, or are worn out, outdated and in poor condition. Meanwhile small industries in the cities have reportedly hampered by poor electricity supply.

Afghanistan is extremely poor, landlocked and highly dependent on foreign aid. It has consistently remained one of the most aid-dependent countries in the world over the past decade.

The high aid dependency has been mirrored in a large structural fiscal gap between expenditures and revenues. Corruption, insecurity, weak governance, lack of infrastructure, and the government inability in extending rule of law to all parts of the country pose challenges to future economic growth.

Afghanistan’s living standard is among the lowest in the world. Almost 85pc of the population living in rural areas are largely dependent on agriculture. Poverty rate has worsened sharply over the past five years as the economy has stalled and the Taliban insurgency has spread.

A joint survey carried out by the Central Statistics Organization and ICON International shows that almost 55pc of the population in 2016-17 lives below the poverty line against 38pc in 2011-12 and threatening the social stability of the country. Around 15pc of the population is incapable to afford their basic needs.

Though Afghanistan $70bn economy with per-capita GDP of $2,022 is gradually recovering from decades of conflict, the security situation remains precarious.

Though Afghanistan continues to face numerous political challenges as it fights the insurgency, GDP growth was estimated at 2.6pc in 2017 slightly higher over 2016. Growth is projected to slow to 2.2pc in 2018, increasing slightly to 2.5pc in 2019.

Published in Dawn, The Business and Finance Weekly, June 19th, 2018