Azerbaijan revises 2022 state budget draft, projects 4% economic growth

Azerbaijan’s government has revised the state budget draft for 2022 based on an average oil price of  $45 per barrel, increasing its revenues and expenditures.

The draft projects a deficit of 3.2 percent of gross domestic product (GDP). It was submitted to the parliament, a source at the Finance Ministry told the Tribune.

The budget for this year is based on the oil price at $40 per barrel, while the deficit is expected at 2 percent of GDP.

The state budget’s updated draft for next year, projects revenues at 26.816 billion manats ($15.774 billion), up from initial projection of 26.407 billion manats and 10.2 percent up from revenues expected this year. Expenses are now projected at 29.879 billion manats, up from a previous 28.974 billion manats and 4.7 percent up from this year’s spending.

In the structure of revenues, 12.710 billion manats or 47.4 percent of total revenues is projected to be transfers from different sources. Bulk of revenues is projected to be provided through income from the oil and gas sector.

In the structure of expenditures, 4.263 billion manats are current expenses, 4.490 billion manats – defence spending, 3.566 billion manats – social spending, 1.789 billion manats – healthcare.

Capital investments in the economy are projected at 2.8 billion manats in 2022, 1.6 percent down from the level expected in 2021.

The government plans to keep the state debt in a range of 18 billion manats till 2026, but its size to GDP is expected to decline to 19.3 percent in 2025 from 24.4 percent in 2021.

Transfers to the state budget from the State Oil Fund are projected in the amount of 11.860 billion manats, 2.8 percent less than expected in 2021.

The Economy Ministry projects economic growth next year at 4 percent with the non-oil sector to grow by 5.1 percent and the oil sector by 1.8 percent.

A jump in the oil sector, to 4.6 percent, is expected in 2023 due to oil output from the Central East Azeri oilfield and the peak of gas production and export from the second stage of the major Shah Deniz project.

According to updated forecasts, the country’s oil sector is projected to amount to 31.9 percent of GDP (27.9 billion manats) in 2022 with declines to 30.2 percent in 2023, 29 percent in 2024 and 27.1 percent in 2025.

The Economy Ministry forecasts annual inflation at 3.6 percent in 2022, down from 5 percent projected in 2021. The trend of slowing inflation rates is expected to continue in 2023-2025.