Prepared by Eurasia Extractive Industries Knowledge Hub Expert Group
The COVID-19 pandemic has once again tested the level of commitment of governments around the world to work under exceptional circumstances. Just like in previous crises, this time governments have been forced to take the lead and intervene in the economy. The quality of the public sector, as well as institutional preparedness, was particularly serious challenge to the government. Although the pandemic is an emergency per se, in countries where good governance principles are in place, an effective system of governance carries a significant portion of the burden. The state helps the system by mustering its resources. Where a good governence system works poorly or does not work at all, all the burden falls upon the emergency agencies established by the central government for this purpose. And of course, the situation can not be managed effectively only by administrative resources alone.
In our recent history, Azerbaijan, which has barely survived the economic crises caused by the global financial crisis (2008-2009) and cheap oil (2014-2016), has faced a more severe test in the current "pandemic crisis". On the one hand, the reduction of economic activity in conjunction with the quarantine measures has adversely affected the income of the state and that of the population, on the other hand, the sharp decline in oil revenues due to fall of oil prices on world markets had a double-sided blow effect on the country's economy. Against this background, the IMF forecasts a 2% decline in the Azerbaijani economy, and the World Bank – 2.6% in 2020. The State Statistics Committee has already announced that the gross domestic product in the first half of 2020 decreased by 2.7 percent. After a three-year hiatus, the country's balance of payments turned negative again in the first quarter of 2020, which increased the sensitivity of the exchange rate of the national currency, which is the main guarantor of macroeconomic stability in Azerbaijan.
On March 19, 2020, the Government of Azerbaijan approved the Action Plan1 to reduce the negative impact of the coronavirus (COVID-19) pandemic on the country's economy, macroeconomic stability, employment and business entities.
The support provided under the Action Plan covers 3 areas:
1) Support for economic growth and business;
2) Employment and social welfare support;
3) Macroeconomic and financial stability.
It was initially planned to allocate up to 1.5 billion Manats from the 2020 state budget to the Cabinet of Ministers in connection with the implementation of the Action Plan, and in the first half of the year funding has been already provided in the amount of 752 million Manat.
According to the Action Plan, part of the salaries of employees in the areas affected by the coronavirus (COVID-19) pandemic was paid by the state, and financial support was provided to individual (micro) entrepreneurs. According to the Ministry of Economy, as of July 28, 2020, there were paid 97955.9 thousand Manats to 215689 employees, and 106765 individual entrepreneurs were provided with financial assistance in the amount of 63499.9 thousand Manats2. In order to improve access of entrepreneurs to credits, measures have been launched to provide state guarantee to 60% of loans in the amount of 500 million Manats and subsidize 50% of interest rates on guaranteed loans from the state budget.
Experts of the Eurasia Extractive Industries Knowledge Hub have prepared a research document assessing the negative effects of the COVID-19 pandemic on the Azerbaijani economy.
The study was conducted in 4 areas:
1) Macroeconomic situation;
2) State budget;
3) State Oil Fund;
4) State Oil Company.
The experts assessed the impact in each area and made recommendations at the end.
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