Construction in Azerbaijan – Key Trends and Opportunities to 2025

The dual shock of the Coronavirus (COVID-19) outbreak and the collapse in oil prices is expected to further exacerbate 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.

According to the State Statistical Committee of the Republic of Azerbaijan, the country’s value-add fell by 9.6% year on year (YoY) in the first three quarters of 2020. Although the industry fell moderately in Q3 2020, compared to the previous quarter, output in the final quarter of the year is expected to have been 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. The oil and gas-dependent economy has been hit hard by a fall in oil production and demand amid the pandemic, with oil production falling by 7.6% YoY and oil exports by 8.8% YoY in the first eleven months of 2020, according to the Ministry of Energy. These factors are expected to weigh on investor confidence, thereby holding back investments in the short term. In addition, the fall in oil exports will put a strain on government finances, thereby impacting public spending on infrastructure projects. On a positive note, gas production and exports have demonstrated more resilience, with production and exports expanding by 4.7% and 14% respectively, in Y-o-Y terms, in the first eleven months of 2020.

Owing to the lower base in 2020, GlobalData expects construction activity to rebound and grow by 9.1% in 2021, and then stabilize to register annual growth in the range of 4.2-4.5% between 2022-2025, supported by investments on overall infrastructure to rebuild the recently-liberated regions, following the Armenia-Azerbaijan disputes. In the 2021 budget, which was approved in December 2020, the government allocated AZN2.2 billion (US$1.3 billion) for the restoration and reconstruction of the liberated territories. Previously, in October 2020, the Azerbaijani State Agency of the Roads also said that it will repair or rebuild 2,661km of roads released from Armenia’s occupation. The country’s construction industry will also be supported by investments in the oil and gas and renewable energy sectors. The government expects to invest AZN24.7 billion (US$14.5 billion) in the oil and gas sector between 2021-2024. In addition, it aims to increase the total share of renewable energy in the electricity mix to 30% over the next ten years. 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.

This report provides detailed market analysis, information, and insights into Azerbaijan’s construction industry, including –

– Azerbaijan’s construction industry's growth prospects by market, project type and construction activity

– Critical insight into the impact of industry trends and issues, as well as an analysis of key risks and opportunities in Azerbaijan’s construction industry

– Analysis of the mega-project pipeline, focusing on development stages and participants, in addition to listings of major projects in the pipeline.

Scope

This report provides a comprehensive analysis of the construction industry in Azerbaijan. It provides –

– Historical (2016-2020) and forecast (2021-2025) valuations of the construction industry in Azerbaijan, featuring details of key growth drivers.

– Segmentation by sector (commercial, industrial, infrastructure, energy and utilities, institutional and residential) and by sub-sector

– Analysis of the mega-project pipeline, including breakdowns by development stage across all sectors, and projected spending on projects in the existing pipeline.

– Listings of major projects, in addition to details of leading contractors and consultants

Reasons to buy

– Identify and evaluate market opportunities using GlobalData's standardized valuation and forecasting methodologies.

– Assess market growth potential at a micro-level with over 600 time-series data forecasts.

– Understand the latest industry and market trends.

– Formulate and validate strategy using GlobalData's critical and actionable insight.

– Assess business risks, including cost, regulatory and competitive pressures.

– Evaluate competitive risk and success factors.

Table of Contents

Table of Contents

1 Construction Outlook

2 Construction Industry: At-a-Glance

3 Latest news and developments

4 Project Analytics

5 Construction Market Data

6 About GlobalData

6.1 Definitions

List of Tables

List of Tables

Table 1: Construction Industry Key Data

Table 2: Azerbaijan, Top Construction Projects by Value

Table 3: Azerbaijan, Construction Output Value (Real, US$ Million)

Table 4: Azerbaijan, Construction Output Value (Nominal, AZN Million)

Table 5: GlobalData Construction Market Definitions

List of Figures

List of Figures

Figure 1: Azerbaijan, Construction Output Value (Real, US$ Million, 2017 Prices and Exchange Rate), 2016-2025

Figure 2: Azerbaijan, Construction Output Value, by Sector (Real, US$ Million), 2016-2025

Figure 3: Eastern Europe, Construction Output (Real % Change), 2020 and 2021

Figure 4: Azerbaijan, Construction Projects Pipeline by Sector (US$ Million)

Figure 5: Azerbaijan, Construction Value-Add, in Constant 2005 Prices, in AZN Million, % Change YoY

Figure 6: Azerbaijan, Gross Fixed Capital Formation, in Current Prices, in AZN Million, % Change YoY

Figure 7: Azerbaijan, Exports, in US$ Million, % Change YoY

Figure 8: Azerbaijan, Construction Projects Pipeline, Value by Stage (US$ Million)

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