Baku, Azerbaijan, Oct. 27
By Azad Hasanli - Trend:
The real exchange rate of the national currency in Azerbaijan is more stable compared to other oil-exporting countries of the CIS, said the report of the World Bank "Low Commodity Prices and Weak Currencies" posted on the bank's website Oct. 27.
The report said that the Azerbaijani manat strengthened in the period of high oil prices, but after the devaluation of the national currency in February 2015 the real exchange rate neared its actual value.
After a 34 percent devaluation against the US dollar in late February the manat has remained relatively stable, the WB analysts said.
Falling oil exports are projected to reduce the current account surplus to 5.2 percent of GDP over the medium term, the bank said.
Public investment is projected to fall to an average of 10.3 percent of GDP between 2015 and 2017, reducing non-oil GDP growth to less than 4 percent per year.
However, investment in the hydrocarbons sector will significantly increase in 2016-17 due to the construction of major gas pipelines. The consolidated fiscal deficit is projected to average 1.4 percent of GDP over the medium term.
A deficit of 3.4 percent of GDP is anticipated in 2015, reflecting the impact of low oil prices and a one-off increase in public investment. This deficit is expected to narrow over 2016-17 as oil prices gradually recover and the government consolidates its expenditures.
"Low oil prices and declining oil output remain the most salient risks to Azerbaijan's growth prospects, as the country's economy has been largely driven by public spending and investment financed by oil revenues," said the report.
Weaknesses in the financial sector pose a significant challenge, as increased dollarization is constraining the supply of credit, the WB experts said.
"In addition, a further deterioration in regional economic conditions could increase pressure on the exchange rate," said the report. "Despite slowing growth, the government intends to protect vulnerable households and safeguard its achievements in poverty reduction."
Edited by CN