ECONOMIC GROWTH ACCELERATES IN AZERBAIJAN, BUT POOR DERIVE LITTLE BENEFIT.

After posting 6 percent GDP growth in 1997 and 10 percent growth in 1998, official statistics released in November indicate that the Azerbaijani economy is once again accelerating. But though Azerbaijan has become one of the CIS’s fastest-growing economies, this growth remains narrowly concentrated in the oil sector and provides few benefits to the poor.

Azerbaijan’s GDP rose an estimated 8.6 percent in the third quarter of 1999 following a 5 percent rise in the second quarter (www.unece.org/stats/cisstat/macro0.htm). Increased oil output, higher oil prices, and inflows of direct foreign investment have boosted construction and business services, and are the primary drivers of this acceleration. The economy should also be benefiting from the rebound in CIS countries (especially Russia) which would help boost Azerbaijani trade within this region. CIS trade, which represented 27 percent of total Azerbaijani trade in the first quarter, fell 52 percent in the same period (TACIS-Azerbaijan, April-June 1999).

However, Azerbaijan’s growth remains strictly energy-based, as non-oil branches of industry are doing far worse this year than in 1998. Although food processing output was up 1.0 percent through three quarters, all other manufacturing branches–many of which are important employers–have suffered substantial declines. Once significant manufacturing sectors such as machinery (down 66 percent) and light industry (down 81 percent) collapsed in the first quarter, undermined by competition imports from other CIS countries, especially Russia.

And despite Azerbaijan’s rapid GDP growth, most Azerbaijanis remain very poor. The average wage runs 179,900 manat (US$46). Although the official unemployment rate was only 1.2 percent (48,000 people) at mid-year, the 1 million refugees displaced during the war with Armenia are not included in these statistics. Most of these refugees survive on a pittance. Other estimates of unemployment in Azerbaijan place the level at 17-20 percent of the labor force.

Economic growth in Azerbaijan is likely to continue, thanks to the country’s energy wealth. But if the Aliev regime does not do a better job in distributing the benefits of this growth more evenly, it may face severe political unrest.

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