Central Bank – Azerbaijan
Macroeconomic Stability Through Strong Financial Policies
In the roughly two decades since the nation achieved independence, Azerbaijan has defied global expectations. The country, whose recession in the mid 1990’s crippled the economy and saw the GDP contract some sixty percent, has throughout its history shown itself to be remarkably resilient. No institution has played a greater role in the country’s continued economic fortitude than the Central Bank of Azerbaijan.
The bank’s Governor, Elman Rustamov, who as appointed in 1995, recalls well those dark days. “The recession in Azerbaijan was the most serious of the former Soviet Republics. We witnessed hyperinflation: the level of inflation in the country at the end of 1994 was 1800%,” he explains. It was against this backdrop that the Central Bank began its stabilization policy. “For historians and international institutions, Azerbaijan is the country whose transition to stabilization was the shortest and the most rapid among peers,” he says. “The country restored economic growth in short notice and the economy started to grow in 1997.”
There’s no doubt the bank’s stabilization policy has worked. Azerbaijan ranks in the 39th position on the global competitiveness index, the highest rank in the Caucasus region. For both inflation and macroeconomic stability, the country is in the top ten globally.
Although Azerbaijan’s economy has experienced consistent and steady growth since the start of the recovery in the late 1990s, the last decade has seen the economy’s expansion further accelerated. “It is one of the golden pages in the economic history of Azerbaijan,” Rustamov says with a smile. “President Ilham Aliyevadvanced a new economic strategy – the catch-up growth strategy – and the economy attained huge results at a very short run. The size of the Azerbaijani economy rose by 3.4 times in real terms, which exceeded global economic growth of that period by multiple times. We have become one of the world leaders in terms of two-digit growth rates.”
Beyond ensuring a strong financial sector and maintaining the macroeconomic stability that is one of the fundamental prerequisites of economic growth, the Central Bank of Azerbaijan also remains committed to ensuring equal distribution of the country’s economic dividends. Great strides have been made already in terms of poverty reduction, with the poverty rate falling from 50% in 2001 to less than 5% in 2011. Now the bank has set its sights on achieving true inclusiveness throughout the financial sector, expanding both geographical access and the sector’s overall financial infrastructure. “We involved over thousand postal outlets to the financial sector via postal banking. In total, over the period the number of bank departments per square meter rose over six times,” Rustamov points out.
With a strong track record of success already, Azerbaijan’s economic growth shows no signs of slowing down. The diversification policy of the government is paying off, with particularly strong growth in the non-oil sector. “We predict that macroeconomic stability will be maintained in the country both in the current year and in the medium run, which will make a huge contribution to economic growth,” Rustamov concludes.