Inflation vacations in Azerbaijan

There has been deflation on the consumer market of Azerbaijan since April. If the price of goods and services decreased by 0.4 per cent in April compared to March, then the figure was 0.9 per cent in May.

This process will continue during the summer season and the prices mainly for food products, particularly for vegetables, fruits, meat and dairy products is expected to decrease. The abundance of agricultural products this year characterised by the increased crop production by 9.5 per cent and livestock by 4.3 per cent, will help maintain consumer prices after seasonal decline.

Consumer inflation in Azerbaijan will be one digit by the end of this year at around six per cent. This government forecast made in 2011 must be justified by the end of the year. It is realistic because the pace of the consumer price decrease grows in the country and amounted to 2.25-fold last month.

In fairness it should be noted that it isn't easy to keep inflation at one level taking into account the fact there are all the prerequisites for its growth, especially the relatively high world oil prices in Azerbaijan and growth of foreign exchange earnings from oil sale. Taking into account these threats, the country's Central Bank widely used monetary instruments to compensate rising prices andthe State Oil Fund continues the policy of sterilisation of foreign exchange money.

The volume of intervention of the Central Bank of Azerbaijan in the currency market was estimated at $233 million during the first quarter of 2012. That was done in order to prevent excessive strengthening of the manat and rising inflation. The oil fund received $4 billion 261.3 million from the sale of oil profits, or 95.5 per cent of the total revenue during the same period.

Another factor for low inflation in Azerbaijan is the small growth rate in consumer prices in world markets due to the slowing of global economic growth. In other words, the weakening effect of instruments of the foreign goods markets reduces the pressure of world inflation on the domestic market of Azerbaijan.

The process of return of deposits to clients of the former USSR Savings Bank may hinder the conservation of inflation at a one digit level till the end of the year. It is known that the issuance of individual lump sum payments to depositors of the Azerbaijani branch of the USSR Saving Bank cover 2.4 million Azerbaijani citizens and these payments will require about one billion manat.

It is known that the issuance of individual lump sum payments to depositors of the Azerbaijani branch of the USSR Saving Bank cover 2.4 million Azerbaijani citizens and for these payments take about one billion manat, which means the stuffing in the economy producing more unsecured money which in turn means emissions of additional unsecured money in the economy

As the Minister of Finance Samir Sharifov said, if the returned money will go on the consumer market, it can upset the balance. The minister advised the public to re-invest the proceeds in banks to minimise this risk.

The number of anti-inflationary measures actively used by the government also includes the increase in the securities market, growth in the number of installed POS-terminals, control over budget spending, anti-monopolisation and an artificial increase in the prices of entrepreneurs.


Leyla Abdullayeva /Trend/