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Azerbaijan’s construction industry to rebound in 2021, says GlobalData

Published by , Deputy Editor
World Cement,

The dual shock of the COVID-19 outbreak and the collapse in oil prices has exacerbated the weakness in Azerbaijan’s construction industry, with output estimated to have shrunk by 15.2% in real terms in 2020 – down from annual declines of 6.1% in 2019 and 8.8% in 2018. However, owing to lower base and driven by investments in overall infrastructure to rebuild the recently liberated regions, the industry is expected to recover in 2021 with an expected real growth rate of 9.1%, says GlobalData, a leading data and analytics company.

GlobalData’s report, ‘Construction in Azerbaijan – Key trends and opportunities to 2025’, reveals that output in the final quarter of the year was estimated to be severely affected due to the economic uncertainty caused by the 44-day battle between Armenia and Azerbaijan, which started in late September 2020 over the disputed region of Nagorno-Karabakh. In addition to this, in late December 2020, the government imposed a strict lockdown in all of its major cities between mid-December 2020 and mid-January 2021, owing to an upsurge in new COVID-19 infections.

Danny Richards, Lead Economist at GlobalData, comments: “Following the signing of the peace deal between Armenia and Azerbaijan over the disputed territory of Nagorno-Karabakh, the government is targeting increased investments in the liberated region. The 2021 budget includes an allocation of AZN2.2 billion (US$1.3 billion) for the restoration and reconstruction of the liberated territories. These funds will be used to restore infrastructure in the road, electricity, gas, water, communication, education and healthcare sectors, along with the restoration of cultural and historical monuments.”

The construction industry will also receive a boost from increasing investments in the oil and gas sector. According to government estimates, the oil and gas sector is expected to receive investments worth AZN24.7 billion (US$14.5 billion) until 2024. Of the total, AZN6.7 billion (US$4 billion) is expected to be invested in 2021, AZN6.9 billion (US$4.1 billion) in 2022, AZN6 billion (US$3.5 billion) in 2023 and AZN5 billion (US$3 billion) in 2024.

Richards adds: “The government’s plan to strengthen its non-oil sectors through an increase in Foreign Direct Investment (FDI) will also attract investments in the infrastructure and industrial sectors in the short and medium term. The government plans to increase the share of non-oil FDI from 2.6% of GDP in 2017 to 4% by 2025.”

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