Government spending in Azerbaijan stood at 36% of GDP in 2017, which is mostly in line with other Commonwealth of Independent States (CIS) countries but significantly lower than in most European countries. After high deficits in the previous year, the budget was balanced in 2017, and the level of public debt finally stabilized at 54% of GDP, which may look moderate but is still four times its size in 2012. The economy finally overcame recession and recorded a robust growth of 4% in 2017, due to increasing oil prices in the second half of the year and high public investments in infrastructure. Inflation, that was higher than 15% in 2016, finally lost some of its momentum, but remained high, i.e. 10% in 2017.The pension reform initiated in 2017 increased the number of years necessary for
retirement from 63 to 65 for men and from 60 to 65 for women, albeit via several annual smaller increases. Numerous state owned enterprises (SOE) are present in the economy, not just in the oil or utility sector but also in power generation, communications, passenger and cargo transport. The largest bank in the country, the International Bank of Azerbaijan, accounts for almost 40% of the total banking assets, and has received several substantial money infusions, since non-performing assets that were transferred to the Agrarkredit reached the level of 25% of GDP. Many of these SOEs have a near-monopoly status, with unclear separation between regulatory bodies and SOE corporate interests. Although facing the same rules and obligations as the private sector companies, SOEs informally enjoy a privileged status as regards government procurements or external financing. Powerful SOEs have also been able to use their influence and block new market entrants. An ambitious plan of privatization of public companies that was drafted in 2016 is slowly under implementation, aiming at attracting foreign investments. Azerbaijani Sovereign Wealth Fund (SOFAZ), which was set up in 1999 with exceeding oil revenues, has been linked to corruption by high state officials and bad investment policies. Corporate tax is set at 20%, while VAT is at 18%. Personal income tax is progressive, being 14% up to a high threshold, and 25% above it, while social contributions stand at 25% of the gross wage (22% paid by the employer and 3% by the employee). This leads to tax wedge of 35% on the average wage.