What do falling global inflation rates mean for Azerbaijan?

Kristalina Georgieva, the executive director of the International Monetary Fund (IMF), stated that global inflation has decreased from 14% in 2022 to below 4% in 2024. Meanwhile, the European Central Bank anticipates an increase in inflationary pressure. According to the ECB's management, which lowered all three interest rates on October 17, “the pace of consumer price growth will accelerate in the coming months, before falling to the target level of 2% over the next year."

However, the latest report from the Food and Agriculture Organization of the United Nations (FAO) shows that global food prices surged at their highest rate in 18 months in September. The FAO’s price index for basic food commodities reached 124.4 points, marking a 3% rise from August and a 2.1% increase year-on-year. A significant 10.4% rise in global sugar prices and a 3% increase in the cereal price index, driven by higher wheat and corn export prices, were key contributors to this surge. Given this fact, how ready is Azerbaijan? Can the process affect the country?

Economist Eldeniz Amirov, sharing his thoughts with Azernews, commented on the situation:

“I would like to mention that there is a calculation methodology for inflation. This methodology is close to each other by various international institutions. And indicators can change based on this methodology. As you mentioned, the increase in value of the International Monetary Fund, the decline of inflationary indicators, and the increase in value given by the World Bank, the World Finance and Food Organization, I would like to mention that the International Monetary Fund does not focus only on food products when calculating inflationary indicators. Here we are talking about non-food products, and services. In other words, the calculation of inflation as a methodology and the numbers explained by the UN may differ from each other. This is not surprising."

Amirov continued, "In addition to the seasonal factors, the threats in the global economy at the same time can, of course, lead to certain value increases in the food market. But in all cases, this is inevitable. This can only be caused by the fact that there is a tendency to increase. In other words, there is always an increase in non-food products. Decreases in the value of non-food products are not possible for a long time. There may be certain changes in a short period. This only depends on the rate of increase. When the rate of increase is high, which means that the rate of inflation is high, when the rate of increase is low, there is still inflation, but the rate of inflation has decreased. But in all cases, there is always an increase in the value of non-food products.”

In terms of Azerbaijan, Amirov shared further insights: “Food prices in Azerbaijan will naturally occur within the existing inflationary conditions. In one sense, average increases in food prices are observed. This is also natural. When calculating inflation, around 528 goods and products, food, non-food products, and services are included in the prices, and the percentage is determined accordingly. Among them, there is always an increase in food prices. Particularly, I think that certain changes can be expected for food prices. But I don’t expect that there will be major increases, such as the severe increase experienced in 2022.”