Baku may still sport all the signs of energy wealth, but, after an almost decade-long boom, the International Monetary Fund is cautioning that Azerbaijan’s oil sector no longer has enough muscle to power economic growth alone.
In a May 13 report, the International Monetary Fund (IMF) forecasts that an estimated 10-percent decline in the oil sector will cause Azerbaijan’s 2010 economic growth to shrink to 2.7 percent – a decline of more than threefold compared with 2009, when the economy expanded at a 9.3-percent rate. Oil production, broadsided by lower world prices and demand, will expand by a mere 1.2 percent, according to the IMF.
“Given that oil production will no longer be the main source of growth, there is an urgent need to accelerate economic diversification,” the IMF wrote.
Non-oil sectors have not yet demonstrated robust growth. Last year, the growth rate in non-energy related sectors decreased from 16 percent in 2008 to a 3 percent.
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Shahin Abbasov is a freelance correspondent based in Baku. He is also a board member of the Open Society Institute-Azerbaijan.