Page 32 - Caucasus Outlook 2023

and non-bank payment organisations are standardised, and that
contactless payments are more widely accepted, resulting in cheaper
payment options. The central bank reviewed and approved the
regulation in April 2022, which increases access to remote banking and
allows bank accounts to be created remotely using digital identity.

Finally, Azerbaijani banks largely enabled the Google Pay system for
their customers.

S&P believes that credit costs will remain elevated in 2022 and beyond,
reflecting lower real disposable income of households and small and
midsize enterprises (SMEs) because of higher inflation.

Fitch Ratings revised the outlook on Azerbaijan to positive and affirmed
it at "BB+", while Moody's Investors Service upgraded the LT- local
currency credit rating of Azerbaijan to "Ba1" from "Ba2". S&P, like Fitch,
affirmed “BB+”, adding the forecast about credit losses in 2022-2023,
which will remain within 0.5%-1.0% of average loan books, still well
below their historical cyclical level.

3.3.3 Industry

Azerbaijan has a workforce of 4.8mn out of its 10.1mn population. Its
economy is based on gas and oil, steel, iron, chemical and
petrochemical products, and textiles. According to the State Statistics
Committee, 76.1% of production fell on the mining industry, 20.1%
processing, 3.2% production and distribution of electricity, gas and
steam, 0.6% water supply, waste treatment and processing.

In the structure of the processing industry, growth was recorded in the
production of other vehicles (+340%), cars, trailers, semi-trailers
(+73.9%), leather, leather goods and footwear (+64.3%), machinery
and equipment ( +46.9%), clothing (+39%), electrical equipment
(+37.1%), furniture (+33.4%), printing products (+23.2%), woodworking
products and wood products (+ 19.6%), paper and cardboard (+17.4%),
construction materials (+14.5%), finished metal products (+13%), food
products (+8%), pharmaceutical products (+7.7%), rubber and plastic
products (+6%), chemical products (+2.7%), metallurgical products
(+2.1%).

A decline took place in the production of computers, electronic and
optical products (-1.2%), beverages (-4.7%), tobacco products (-4.9%),
petroleum products (-5.3%), installations and repair of machinery and
equipment (-23.3%), textile industry (-28.8%).

In the field of production and distribution of electricity, gas and steam,
the growth in production in January-November 2022 amounted to 3.2%,
in the field of water supply, waste treatment and processing was 4.7%.

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