Is there a case for front-loaded fiscal consolidation in Azerbaijan?
This paper critically reviews the case for fiscal consolidation in Azerbaijan by adopting a growth and employment perspective. It commences with a global and comparative context in order to point out that, since 2010, fiscal consolidation has become a major feature of the global policy agenda. This development has been shaped by the experience of the Eurozone countries. Hence, there is much that Azerbaijan can learn by revisiting the European experience.
The paper then discusses the case of Azerbaijan. It notes that fiscal consolidation is a perennial feature of public policy discourse in Azerbaijan. Such a discourse is often driven by international financial institutions. The paper assembles both analytical arguments and relevant empirical evidence to suggest that front-loaded fiscal consolidation on a significant scale will impose costs in terms of reduced growth momentum and employment prospects. These negative consequences are unlikely to be compensated by long-run gains in terms of enhanced macroeconomic stability and private sector-led economic diversification. The paper concludes by offering policy recommendations.