Examination on sustainability

Firstly the crisis in the USA and other unfavorable events on the global financial markets only contributed to the growth of pessimism amongst the economists frequently raising the theme of the approaching of new global crisis. However, now when serious danger appeared for the economy of Russia, experts do not doubt that the global economic crisis began its offensive. This was testified by the issue that as a result of large fall in the shares of the Russian stock exchanges, the trades in the stock markets RTS and MMVB were stopped according to the order by the Federal Financial Market Service of Russia.

The turn of bankruptcies of financial companies shook America. Last events - closing the twelfth bank (Ameribank Inc. was closed on 19 September by the regulators of the USA in connection with its financial condition), intake of Bank of America of the investment giant Merill Lynch and bankruptcy of investment bank house - Lehman Brothers. All these forced economists to speak of beginning of deep crisis compared to the Great Depression. Many large structures, financial organizations with the 100-150 years history are in stress.

The threat of the impact of global financial crisis on the economy of Azerbaijan exists, and it is sufficiently significant because as a result, any financial crisis transforms into economic crisis. Azerbaijan is integrated into the global economic system and is subject to the consequences of globalization. Other question is that in Azerbaijan there are both paradoxical factors, which positively affect "the defense" of the country from the financial crises, and thoroughly developed approaches on how to combat it.

Stock market

For example, it is paradoxical, but today the absence of threat for the domestic stock market is connected with its insufficient integration into the world financial markets and also insignificant dependence on the world financial institutions. Thus, in recent years the share of non-stock market exceeds the share of operations at the Baku Stock Exchange and this relationship composes 95 to 5 percent respectively.

The turnover of stock exchange transactions at the Baku Stock Market as a result of 2008 is expected at the level of AZN 7-8bln against the forecasted AZN 10bln. However, reduction in the amount of operations at the first and second stock market is explained through the growth retardation in the banking system of Azerbaijan.

Negative factor from the instability of the global financial crisis for Azerbaijan is only the delay of issuance of sovereign Eurobonds in the international markets. However, it is impossible to call it losses, but most likely vice versa.

Banking market

The second most vulnerable fact for the crisis in the financial system of Azerbaijan - bank - is that it in proper time manufactured "medicine" for the threat. At the beginning of year the National Bank of Azerbaijan called on the banks to hold careful policy, taking into account the estimation of all elements of situation in the market. It warned the banks to create institutional platform prior to the beginning of an increase in the assets and operations. On the other hand, the closeness of the banking market of Azerbaijan played in favor of the country.

Several experts consider that the global financial crisis already affected the economy of Azerbaijan, and the limitations in the credit activity of local banks testify it. Currently the banks do not have a possibility to provide both consumer and entrepreneurship credits. Subsequently, the banks can even face the problem of re-paying already borrowed monies from the foreign capital markets.

Insurance market

With regards to the impact of the global financial crisis on the insurance market of Azerbaijan, according to the Head of Insurance Control Department of Finance Ministry of Azerbaijan, Namig Khalilov, it is impossible to exclude the negative consequences of the financial crisis for the insurance market of Azerbaijan. As known, Azerbaijan insurers re-insure part of the insured risks in the foreign re-insurance companies. If as a result of crisis, any re-insurance company, which participates in re-insurance of our insurers, becomes bankrupt and will not be able to carry out its obligations regarding the payment of insurance compensation, then this can put its Azerbaijan partners in a very difficult financial condition. In order to reduce the risks linked with the re-insurance, the insurers need to diversify their re-insurance programs, distribute re-insurance amongst possibly larger number of reliable re-insurers, not to allow the excessive concentration of the re-insured risks in one re-insurer, or to possess large own capital.

Oil profits

The only fact that would be serious to fear is the influence of crisis in the incomes of the State Oil Fund of Azerbaijan (SOFAR). But SOFAR proved to be fully armed. The matter is that the Oil Fund places its monies in high-rating securities and the demand for the similar securities grows in the crisis periods and their cost begins to increase. Consequently, the forecast index on the incomes of SOFAR is expected to exceed the forecasted indicators.

According to the Executive Director of State Oil Fund of Azerbaijan (SOFAR), Shahmar Movsumov, the drop in the oil prices showed the accuracy of selecting conservative approach during devising the budget of the Fund. If last year the oil price in the calculation of the budgetary forecasts was $50 per barrel, this year it totaled $70per barrel. Currently the incomes of SOCAR exceed AZN 10bln and by the end of the year they are expected to increase up to AZN 13bln. But the decrease in the costs of securities in the world markets will affects the incomes of SOFAR from management of its assets. According to our accounts and the information, obtained by us from the Norwegian Oil Fund, the losses from the beginning of the year to the present day is 3-4%.

Foreign trade

The probability of the impact of global financial crisis on the commodity turnover of Azerbaijan would be great if not on the raw export of goods. According to the official statistics, the greatest specific weight in the export article of the country belongs to the crude oil (93.80%). As known, now boom of demand is observed in the world for the raw goods, prices of which in the world market grow. Thus, forecasted by the World Trade Organization, the retardation of an increase in world trade under the influence of the financial crisis in 2008 will not touch upon the trade of raw material, which will continue dynamic increase, which will be in the hands of the exporters of energy resources, and it means in the hands of Azerbaijan. But the fact that all commercial operations of the country are calculated in the American currency makes the economy of Republic less sustainable before the change in the exchange rate of dollar. After Italy, the USA is the second, important exporter of Azerbaijani oil and oil products.

Since the beginning of the year the USA and Japan have decreased the growth rates of the import by 7%. This tendency is connected, first of all, with the consequences of global financial crisis because the limitation of financial flows slowed down commodity turnover as well. If the import is sharply reduced in any country, then this means the impossibility of the realizing its products with the exporting countries that also leads to the appropriate decrease in the volume of their export. If the geography of import and export of the countries of the world economy is strongly diversified, the reduction of import in one country, acquiring mass character and worsening world-wide situation, will affect many states.

Azerbaijan supplying drinking water to liberated Shusha city (PHOTO)
Azerbaijan supplying drinking water to liberated Shusha city (PHOTO)
Putin meets RSC members to discuss Russian peacekeepers' activities in Karabakh
Putin meets RSC members to discuss Russian peacekeepers' activities in Karabakh
France-24 TV channel broadcasts reportage about liberated Fuzuli district of Azerbaijan (VIDEO)
France-24 TV channel broadcasts reportage about liberated Fuzuli district of Azerbaijan (VIDEO)
Loading Bars
Brexit goes down to the wire: EU and UK say big differences remain
Iran expected to reduce potato production
Azerbaijan national team won silver and bronze medals at 36th European Championship in Ukraine
Diesel fuel production down in Azerbaijan
Кazakhstan Electricity Grid Operating Company opens tender to buy batteries
Export of grain and legumes by Turkey to Iran down
Turkey registers nearly 30,000 new coronavirus cases as recoveries surpass 390,000
Kazakhstan has high hopes for homegrown COVID-19 vaccine - Minister
Georgia expect stabilization of pandemic with the expansion of restrictions
Iraq reports 2,545 new COVID-19 cases, 547,215 in total
Resolution adopted by French Senate is gross violation of int'l law - Honorary Member of French Parliament
Erdoğan urges public caution against COVID-19 in Turkey amid violations
76 Iranian professors among world top 2% scientists
Monetary policy in Georgia remains tightest among CIS - Renaissance Capital
Representatives of Kyrgyzstan take part in XVIII meeting of CSTO ICMEC
Britain records 16,022 new coronavirus cases, 521 new deaths
Azerbaijani gymnasts reach finals of 36th European Championship in Rhythmic Gymnastics in Ukraine
Turkish political parties condemn French Senate’s resolution on Karabakh
World Maritime University, Georgia aim to develop maritime education, capacity-building activities
Georgia makes giant strides in transposition of energy efficiency acquis
Cash receipts from Azerbaijan to Georgia increases
Number of debit cards in Azerbaijan increases
Uzbekistan increases raisins export to Netherlands
Georgia to subsidize wheat flour price
IAEA to implement multiple projects in Georgia
Uzbekistan, Hungary consider establishing Uzbek-Hungarian Business Council
Uzbekistan confirms repayment schedules on ADB loan for solid waste cleaning
Percentage of problem loans in Azerbaijan down
Eni Turkmenistan Ltd opens tender for vehicles provision
Tree-planting campaign continues in Azerbaijan's Gubadli (PHOTO)
Azerbaijan raises commercial gas production
COVID-related quarantine may be strengthened in Kazakhstan in December
German Bundestag welcoming cessation of hostilities in Karabakh for sustainable peace
Spain names main Turkmen sectors of its interest
Iran to follow FATF-related bills
French Development Agency puts emphasis on increasing solar and wind capacity integration in Georgia
Putin to hold annual press conference via video link on December 17
Share of Austria in total import of Azerbaijan increases
Kazakhstan, Canada discuss prospects for agriculture co-op
Iranian Aras Free Trade Zone reveals its trade surplus
Modernization of primary gas treatment unit carried out at Uzbek oil field
Ambassador of Mexico meets with Azerbaijani Acting Minister of Culture
Azerbaijan supplying drinking water to liberated Shusha city (PHOTO)
Azerbaijan consistently works to strengthen regional cooperation - MFA
Azerbaijan's import of chemical products from Turkey up
Conflicts, external aggression threaten peace, security - Azerbaijani FM (PHOTO)
Azerbaijani Minister of Economy receives Qatari ambassador (PHOTO)
Iran's industrial cities work at minimum capacity
U.S. agency opens probe into 115,000 Tesla vehicles over suspension issue
Turkey discloses Istanbul Airport's ten-month passenger traffic volume
Japan ruling party proposal backs assistance for COVID-hit airlines
Iran's Social Security Organization to forgive insurance fines of employers
Elbit Systems wins Spanish Army radio deal
Putin meets RSC members to discuss Russian peacekeepers' activities in Karabakh
Uzbek metallurgical plant switches to int’l financial reporting standards
New company established in Azerbaijan's Sumgayit city
Iran to close public offices amid COVID-19
Volume of industrial lending in Azerbaijan grows
Azerbaijani 'Maestro Niyazi' dry-cargo ship repaired and tested
France-24 TV channel broadcasts reportage about liberated Fuzuli district of Azerbaijan (VIDEO)
Small state enterprises, vehicles to be auctioned in Azerbaijan
Uzbek Ministry of Finance eyes setting excise tax on sugar imports
New electronic services to be introduced in Turkmenistan's banking system
Oil bitumen imports decrease to Georgia
10M2020 cargo, passenger traffic in Turkish Esenboga Airport drops
Discovery of Turkmen scientists expected to make unique contribution to healthcare system on global scale
Azerbaijan detects 3,712 new COVID-19 cases, 1,359 recoveries
World to need at least 1.1 trillion barrels of hydrocarbons over next 20 years
Kazakhstan decreases crude petroleum oil supplies to Netherlands
Number of construction enterprises, organizations in Uzbekistan up
Central Bank of Azerbaijan reveals data on population's deposits
Georgia sees decrease in import of aviation fuel
Oil & gas industry is not at risk of being starved of capital
Nearly half of bank deposits in Azerbaijan made in foreign currency, says CBA
Turkmen Health Ministry opens tender for medical supplies purchase
Iran Parliament speaker obliges gov't to implement “People's Livelihood Protection Act” as soon as possible
Luxury hotels to be created in Nagorno-Karabakh region
Azerenerji OJSC implementing essential project in Karabakh, adjacent districts
Gold, silver prices in Azerbaijan down
Kazakhstan's Kazatomprom sees threefold increase in profits
Turkey's VP talks current defense-related projects
Iran to join several countries in coronavirus vaccine development
Cybersecurity - one of main objectives of Georgia - Energy Community Secretariat report
UNDP office in Uzbekistan to buy agricultural equipment via tender
Central Bank of Azerbaijan plans to raise funds at deposit auction
Azerbaijan's Central Bank reveals year-on-year data on lending to household sector
Facebook cryptocurrency Libra to launch as early as January but scaled back
“Investment Treaty” intensively negotiated between Georgia and Japan
ACG oil transshipment from Ceyhan terminal exceeds 190 million barrels
Turkmenistan prepares project for intellectual property system dev’t
Prime Minister Modi inaugurates RE-Invest 2020
TAP is operational and can deliver gas, says managing director
Uzbek Anti-Crisis Fund expenses up due to extended COVID-9 resistance
Ruling coalition in Germany stands for Berlin’s participation in promoting peace in Nagorno-Karabakh
Azerbaijani gymnasts in group exercises reach final of European Championship in Ukraine
Azerbaijan's labor ministry, Azermash Group LLC sign tender contract
Iran reduces imports of chemicals from Turkey
Plastic cards becoming more popular in Kazakhstan
Turkish Ombudsman Institution prepares special report on Armenia's war crimes against Azerbaijan (PHOTO)
Turkmenistan prepares project aimed at developing energy diplomacy
All news