Sectoral Structure of National Economy

Azerbaijan has known as the one of main oil-gas producer in the region. Furthermore, the Azerbaijan economy experiences it’s the most difficult time in the last decade. The main factor is the recent drops in the world oil prices and it has negative impact on the oil-dependent economies.

Therefore, the situation has induced the Azerbaijan government to reconsider its fiscal and monetary policies. Azerbaijan's economic policy led to a marked increase in national income per capita in Azerbaijan. According to the World Bank (Atlas methodology) classification, Azerbaijan was included in the category of poor countries in terms of per capita income in 2004, while it was below the average in 2005 and was included in the countries category in 2009. With income above average. The current economic growth model successfully completed its life cycle and allowed it to achieve its goals. The low oil prices created significant problems for the Azerbaijani economy.³⁰ As can be seen from Figure, since 2014, in the country's total strategic foreign exchange reserves (a combination of CBAR and SOFAZ reserves), there has been a downward trend in the measures taken by CBAR and SOFAZ to prevent further depreciation of manats. In 2014, the cumulative

30 CESD, “Currency market in Azerbaijan”,http://cesd.az/new/wp-content/uploads/2016/08/

0.501 1.52 2.5

AZN/USD rates

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foreign exchange reserves of the State Oil Fund of the Central Bank of Azerbaijan and the State Bank of Russia decreased to USD 50.86 billion and the following year to USD 38.59 billion.

Figure 3. Foreign exchange reserves, USD billion

Source: SOCAR, 2016 Annual Report, 28, http://www.oilfund.az/ Annual_Report_2016_ENG.pdf

In total, the private sector holds about 80% of the gross output of the economy. In the industry the private sector produces more than 85% of the industrial products and services. The private sector holds the main part in construction too. Thus, this percentage changed between 72%

and 90% during the last decade. Besides that, in the agriculture and trade activities the private sector almost produces all of the output. However, subsequently, this situation changed favour of the private sector with about 80%. Apart from these, the private sector operates with approximately 80% share in the communication.

Table 4. Share of the private sector in GDP, current prices of the previous years, as % Indicators 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

2014 2015 2016 Jan-17 Mar-17 Jul-17 Sep-17

Central Bank Sofaz Total

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Indeed, the mining sector produces the main part of GDP. This share was 42%, reached to 53% in 2007 and held more than 40% of GDP between 2009 and 2012. It demonstrates that from 2013 to 2014 the share of the mining sector has decreased due to the reduction in the crude oil production. The construction sector has played the second largest role (increased from 9% to 12%).

Not only these activities, but also the share of the trade (from 6% to 7.8%), financial and insurance (from 1.4% to 2.4%), tourism (from 0.6% to 2.2%) sectors increased respectively. In spite of these growth, agriculture (from 9% to 5%), manufacturing (from 6.5% to 4.8%), transportation (from 5.2% to 4.5%), information and communication (from 2.2% to 1.8%) lost their previous position.

Table 5. Production of the GDP by types of economic activity, percentage of GDP

Sectors 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

One of the key areas of sustainable and dynamic development of Azerbaijan's economy is non-oil industry. The country's socioeconomic development is based on only one factor, and the economy's dependence on only one factor can not be considered as an expedient and threatens the crisis. In this regard, as a result of the dynamic development of the non-oil sector, the dependence on the oil sector in the country's economy will be substantially reduced. The development of the oil sector plays a key role in the development of the non-oil sector, and the development of the

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non-oil sector's income from the oil sector in the country's economy paves the way for its development. As a result of the purposeful and consistent economic policy carried out in the country, the country's development has been consistently characterized in recent years. Thus, the non-oil sector grew by 7.9% in 2010, including 29.7% in information and communication sector, 4.3% in transport and warehousing and 20.3% in construction, increased. An analysis of the 2015-2018 results shows that during this period, along with the general economic development, sustained development was also observed in the non-oil sector, and the non-oil GDP was relatively stable.

In the non-oil sector of the country in 2015, an additional value of 37.7 billion manat was created, and in general, 59.0% of them fell on social and other services, trade, repair of vehicles and construction sites. In 2015, the value added in the non-oil sector of the country's economy increased by 1.1% compared to the same period of the previous year. In 2016, the non-oil industry produced 6075.4 million manat and increased by 3.6% compared to the same period of the previous year. The share of added value created in the non-oil industry was 36.1%. During the reporting period, the share of non-oil products in total industrial products in the country was 26.4%, while oil industry contributed 1.0 per cent to the industry's growth. In the mining sector of the non-oil industry, 131.7 million manat, 4525.2 million manat in the manufacturing industry, 1224.6 million manat in the production, distribution and supply of electricity, gas and steam, water supply and waste disposal products were produced in the amount of 193.9 million manat.

In order to protect domestic production, to increase non-oil exports and to diversify exports, imports for goods of 84 items have been applied for a two-year specific period. Imported customs duties have been provided for the transition to a slow-moving system. Import duties on heading 3661 were reduced. The import duties on heading 690 have been increased. The main reason for the rise was the protection of domestic goods from external influences. According to the State Statistical Committee, in January-June 2018, 6331.7 million manat was allocated from all financial sources for the development of the country's economic and social spheres, or 14.1 percent less than in the corresponding period of the previous year. This decrease was due to the decline in investment in the oil sector, while the volume of funds directed to the non-oil sector was 21.5 percent, including non-oil investments.

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In August 2018, the Economic Review Analysis and Communication Center's Export Overview, which aims to increase entrepreneurship awareness, increase the ability of local products to grow on traditional and new markets, accelerate the integration process in international markets, shows that in January-July of 2018 - export on the oil sector amounted to $ 969 million.

Export in the non-oil sector increased by $ 114 million or 13 percent compared to the same period last year. According to the State Statistical Committee, exports to Russia amounted to 353 million dollars, 215 million to Turkey, 81 million to Georgia, 78 million to Switzerland and 29 million US dollars to China. In the list of non-oil products exported in January-July of this year, tomatoes ($

144 million) were the first and $ 68 million gold and the second and the specific mass of gold (non-coin, other unused) the smallest initial polyethylene ($ 57 million) was third. Generally, export of fruits and vegetables totalled $ 301 million in 7 months of 2018, exports of plastics and finished products to US $ 79 million, export of aluminium and its products to US $ 78 million, ferrous metals and export of finished products to 49 million US dollars $ 45 million in cotton fiber, export of chemical products worth $ 41 million, export of cotton yarn - $ 12 million. In the first seven months of 2018 exports of electricity amounted to 2.2 times, export of cotton yarn – 32% , aluminium and its products – 16%, export of fruits and vegetables - 19%, plastics and tobacco products – 14%, export of chemical products increased by 1%. According to the State Statistical Committee, export of non-oil sector in July of current year amounted to 122 million US dollars.

In January-July 2018 Azerkosmos was exported to 22 countries of the world (satellite telecommunication services and optical satellites). In the first 7 months of this year,