Azerbaijan’s recently published draft budget indicates that the country will continue to consolidate its fiscal policy in 2017 by reining in current expenditures while cutting public investment. The revenue projections in the document are based on an oil price of US$ 40.0/bbl and 1.0% GDP growth. This assumption appears realistic, given the current trend in oil prices, and we see minor upside. The growth rate in non-oil sectors might be lower than forecast, though this will probably be compensated for by better-than-forecast performance in the oil sectors. Downside risks to the targeted non-oil GDP growth may be eliminated if private investment increases, specifically from abroad since foreign investment, has a higher efficiency in generating growth and financing the external deficit,. There is theoretical upside, subject to policies that attract investors, particularly in light of the stock of foreign investment in non-oil sectors.
