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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005<br />
BAKU INTERBANK CURRENCY EXCHANGE<br />
ECONOMIC AND POLITICAL DEVELOPMENTS<br />
Politic and Economic Environment:<br />
Baku, Azerbaijan's capital and largest city<br />
emerged more than 100 years ago as one of<br />
the earliest centers of the international<br />
petroleum industry. At the beginning of the<br />
21st century, oil and gas activity remains the<br />
engine of the Azerbaijani economy. Indeed,<br />
oil exports accounted for 90% of all exports<br />
in 2002. It appears that oil development in<br />
the Azeri sector of the Caspian will fuel<br />
economic development and income growth<br />
for many years to come, especially after<br />
official sanctioning of the Baku-Tbilisi-<br />
Ceyhan (BTC) pipeline, which will pump<br />
Azeri oil through Georgia and Turkey to the<br />
Mediterranean terminal at Ceyhan, Turkey,<br />
and related projects, which will inject an<br />
estimated US$ 8 billion in investment over<br />
the next few years.<br />
In August 2003, the parliament of Azerbaijan<br />
elected President Aliyev's son, Ilhan Aliyev,<br />
as the prime minister. The measure was<br />
viewed as an attempt to secure a peaceful<br />
political transition, in the event that the ailing<br />
president were to become incapacitated.<br />
President Aliyev was scheduled to run for a<br />
third term in the presidential polls in October<br />
2003, but withdrew from the election contest<br />
due to health concerns. His supporters<br />
transferred their efforts to his son, the new<br />
Key Information Contacts<br />
National Bank www.nba.az<br />
State Committee for Securities www.scs.gov.az<br />
Ministry of Finance www.maliyye.gov.az<br />
National Depository Center www.mdm.az<br />
International Bank of Azerbaijan www.bse.az/images/p_ibar.gif<br />
National Bank of Azerbaijan www.nba.az/<br />
State Committee for Securities www.scs.gov.az<br />
Ministry of Finance www.minfin-az.com<br />
Ministry of Economic Development www.economy.gov.az<br />
ECONOMIC RATIOS<br />
Domestic<br />
savings<br />
PAGE 46<br />
Azerbaijan<br />
Lower-middle-income group<br />
Trade<br />
Indebtedness<br />
Investment<br />
Prime Minister Ilham Aliyev. The younger<br />
Aliyev went on to win the election in a<br />
landslide victory.<br />
In December 2003, Heydar Aliyev died in a<br />
United States hospital at the age of 80.<br />
He was undergoing treatment for heart and<br />
kidney problems.<br />
In 2004, bilateral relations with Armenia<br />
constituted one of the main issues facing<br />
Azerbaijan's political landscape. The new<br />
Azerbaijani president expressed his hope<br />
that the Organization for Security and<br />
Cooperation in Europe (OSCE) would<br />
continue in its effort in forging a resolution to<br />
the conflict in Nagornyy Karabakh.<br />
On the domestic front, President Aliyev has<br />
expressed confidence in the economic<br />
growth of Azerbaijan in the next few years, as<br />
well as the strengthening of democracy and<br />
the improvement of human development<br />
concerns. In these regards, he said, "Our<br />
assuredness stems from the considerable<br />
investments in Azerbaijan, the development<br />
of democratic reforms, and the<br />
implementation of social programs to<br />
improve people's quality of life."<br />
GROWTH OF INVESTMENT AND GDP<br />
(%)<br />
90<br />
60<br />
30<br />
0<br />
97<br />
GDI GDP<br />
Economic Performance:<br />
Foreign direct investment in the petroleum<br />
sector boosted GDP growth to 11.2% in<br />
2003 compared to 10.6% in 2002. Consumer<br />
price inflation has been restrained in recent<br />
years, declining slightly to 2.2% in 2003 from<br />
2.8% in 2002. Fiscally speaking, Azerbaijan's<br />
deficit increased in 2003, to nearly 2%,<br />
compared to 0.5% in 2002, but this was<br />
primarily due to infrastructure-related<br />
expenditures and an increase in pension<br />
wages. Agricultural work still occupies some<br />
40% of the Azeri workforce, and the<br />
unemployment rate has remained low (at<br />
1.4% in 2003). Although oil revenues<br />
represent a large portion of Azerbaijan’s<br />
economy, they have made inroads into this<br />
problem, with non-oil economy growing<br />
significantly in 2003. 1<br />
1 Economic and Political Overview, County Watch<br />
Incorporated, 2005<br />
98 99 00 01 02 03<br />
* World Bank reports