ADB: Change of Azerbaijan’s exchange rate policy will influence our forecasts

ADB: Change of Azerbaijan’s exchange rate policy will influence our forecasts
# 17 February 2015 15:23 (UTC +04:00)

Baku - APA-Economics. “The researches being conducted by Asian Development Bank’s representation in Baku will be completed at the end of March. The analyses cover outcomes of 2014 and forecasts of 2015 and 2016”, ADB’s Senior Economics Officer in Azerbaijan Nail Valiyev said.

“Generally, forecasting is too hard this year because of Azerbaijan’s economy faces certain difficulties on the background of oil price decline. Firstly, oil price decline seriously influences Azerbaijan’s budget and the government can prefer implementation of priority projects and switch to policy of reduction of the capital expenditures. Azerbaijan was increasing capital investment in the state budget and these were being directed by government to the support f non-oil sector. However, recently, decline of oil revenues makes government consider certain issue. However, oil price decline did not influence Azerbaijan in 2014. Because as you know oil price was exceed $100 a barrel last year. However, 2015 will be difficult for Azerbaijan”, Valiyev said.

Commenting on changing of exchange rate policy by the Central Bank of Azerbaijan, Valiyev noted that rise of dollar will have impact on Azerbaijan: “But, the Central Bank has sufficient strategic currency reserves and using these reserves, manat will gradually decrease. Because change of exchange rate of manat is one of the factors influencing inflation. We are researching how the increase of inflation will influence the economic growth. Other issue is that decline of oil revenues and budget expenditures vwill have impact on development of non-oil sector. Of course, oil price decline mainly influences oil sector. As you know, base price of oil in Azerbaijan’s budget for 2015 makes $90. Current oil price makes $56-60. Therefore, the state budget is under pressure. However, if we take into account the strategic currency reserves of Azerbaijan and necessary measures related to fiscal policy are taken, economic growth can be maintained in a short-run. But, if budget expenditures sharply decrease and manat is devalued sharply, this will have negative impact on main indicators of the country”.

The Senior Economic Officer said that a new tendency is observed in the currency policy: “Demand for dollar is high in the market. There is a psychological factor too. The depositors prefer to exchange their deposits from manat to dollar. Deposits in dollar placed in December, 2014, rose 7%. While, manat deposits were increasing prior to December. The practices in some countries say that preference of dollar causes dollarization effect and this should be regulated”.

Touching upon statement of the Central Bank’s chairman Elman Rustamov that the indicator of inflation will make 5-7%, the Senior Economic Officer said that te regulating authority will take all necessary measures to maintain the inflation at the mentioned level.

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THE OPERATION IS BEING PERFORMED