MP: Fall in oil prices not to affect Azerbaijani economy

Economy Materials 10 March 2020 15:13 (UTC +04:00)

BAKU, Azerbaijan, March 10

By Samir Ali – Trend:

The fall in oil prices is not at such a level to affect the Azerbaijani economy, Azerbaijani MP Tahir Mirkishili told Trend.

Mirkishili was commenting on the sharp drop in oil prices in the world market.

"Of course, a sharp drop in oil prices cannot but affect the economies of oil exporting countries,” the MP added. “Presently, Azerbaijan, on average, exports 540,000 barrels of oil per day. The total export volume exceeded import volume by more than $8 billion (excluding gold import) in 2019, oil export amounted to about $15 billion.”

“As of nine months of 2019, the surplus in the oil and gas sector amounted to $9.9 billion while deficit in the non-oil sector amounted to $4.8 billion in the consolidated balance sheet,” Mirkishili said.

The Azerbaijani State Oil Fund’s (SOFAZ) revenues for 2020 are planned to reach 12.4 billion manat ($7.3 billion), of which 11.4 billion manat that's $6.7 billion (92 percent) are envisaged for transfer to the state budget, the MP said.

“While speaking about the impact of changes in oil prices on the Azerbaijani economy, it is necessary to take into account three scenarios, namely, short-term, medium-term and long-term,” Mirkishili said.

The MP stressed that initially, the price of a barrel of oil in the Azerbaijani budget was set at $55.

“That is, if a barrel of oil costs $30, then Azerbaijan will receive revenues by $13.5 million less per day,” the MP said.

“Then, in case of the short-term scenario, if the oil price remains at this level for one month, then the country's economy will receive $405 million less,” Mirkishili said. “In case of the medium-term scenario, if the oil price remains at this level for five months, the economy will lose $2 billion. If such a price remains for nine months, the economy will lose $3.6 billion. All these scenarios are not at such a level to cause great fluctuations in the country's economy.”

“There are enough other factors that can be considered more thoroughly,” the MP added.

"The positive balance of the consolidated balance worth $5.1 billion, an excess of export over import by $8 billion will minimize the impact of such a sharp drop in oil prices on the economy,” the MP said. “At the same time, this effect is also minimized thanks to the reforms which are carried out by the Azerbaijani president recently, rapid development of non-oil sector, high growth rate of export of non-oil products.”

“I believe that such a sharp drop in oil prices is mainly the result of the 'oil war' between Saudi Arabia and Russia,” the MP said. “An increase in production and a decrease in price are not economically beneficial for any country. On the other hand, according to the estimates, the Saudi Arabian economy may keep up with the oil price at $84 while the Russian economy at $42.5. It seems inconclusive that in these conditions the price will remain low for a long time.”

Mirkishili stressed that there is a minimal likelihood that there will be devaluation of Azerbaijani manat again, practically there is no such possibility.

"The society is concerned about devaluation and as an economist, I would like to say that there is no reason for panic," the MP added.