President Aliyev: Azerbaijan’s economy stable and sustainable (UPDATE 2)
Details added (first version posted on 19:05)
Baku, Azerbaijan, Jan. 21
Azerbaijan's economy is stable and sustainable, said President Ilham Aliyev Jan. 21, speaking at 'The New Energy Equation' session held as part of the World Economic Forum in Davos, Switzerland.
The president said it is difficult to expect the oil price going lower, but having this situation today, a decrease in oil price will not be surprising.
He also said that despite the decrease in oil prices, Azerbaijan has kept the social package in place.
Talking about coordination with OPEC, President Aliyev said that Azerbaijan is ready to do it, and actually that was a part of the discussions with some of OPEC members.
The president added that though Azerbaijan is not a big oil producer, more coordination between OPEC members and large non-OPEC members with respect of the reduction of production can bring results.
Unfortunately, after every OPEC meeting the price of oil goes down, noted President Aliyev. He further stressed the necessity of coordination between large non-OPEC countries and OPEC members, and increasing the level of mutual trust.
"If it doesn't happen, OPEC itself will not make a decision, and without it we will have this situation and just wait when the oil price will reach its bottom," he said.
The president added that this is very exhausting, also from a psychological point of view, not to mention Azerbaijan's needs to balance the budget, to have funds for investment and not only into oil and gas.
President Aliyev noted that Azerbaijan needs to invest in social infrastructure, industrial infrastructure, and at the same time to maintain the level of production needed to invest in oil and gas.
He also noted that Azerbaijan has started fundamental reforms of its financial sector, economic reforms, focusing on export-oriented non-oil economy production and forgetting about the oil factor.
"We were trying to prepare ourselves for this period [to come] in 15-20-25 years, but we have to do it now, and I think that we will cope with this situation," said the president.
President Aliyev also noted that the economic situation in Azerbaijan is stable.
"Our foreign debt is only 12 percent of GDP, and our foreign currency reserves are almost the same level as our GDP. I am sure we will manage the crisis, but of course we want to have a predictable future, and to plan our budget for the next year," President Aliyev said.
As for the decline of Azerbaijan's national currency, the manat, President Aliyev said there were several factors for that, such as the drop in oil prices.
The president noted that Azerbaijan's national currency during the last 10 years gained weight against the US dollar, which was a little bit artificial.
President Aliyev went on to add that previously one manat was $1.3, so the first change in the national currency rate was to bring one manat back to $1.
He further said the second change in the rate was mainly due to devaluation of national currencies in neighboring countries, and Azerbaijani goods became non-competitive, adding that this was an additional burden on the country's budget.
"We tried to resist as much as we could, we lost some of our national bank reserves, but we had to take this measure. There were of course some concerns about that, because it immediately reflected in the rise of consumer prices, which we import, since we are still goods-import dependent country. So the increase in prices created certain concern," said the president.
He further said that there was some minor concern based on stress situation, people weren't prepared for that.
"But now it is over, and I believe that the economic development in Azerbaijan will be sustainable," Ilham Aliyev said.
The President said he believes that Azerbaijan had one of the fastest growing economies in the world with 300-percent growth in the last 10 years.
"It was too much, I think, so now the cycle goes down, and I think that with the currency reserves we will manage the situation," President Aliyev said.
Talking about further dynamics of the global oil prices, Azerbaijani president said that he believes that they are close to dropping $3 more, and then, in the second half of the year, the market will grow.
It is a cyclic system, said Ilham Aliyev.
"I remember the time when we launched our main oil development project in 1994, the oil price then was $12, and it seemed to be very normal. And when we were planning the development, I remember, we thought about an optimistic scenario, which was $22 dollars," President Aliyev said.
"Now we are very close to that optimistic scenario," the president said, expressing hope that the market will stabilize, because the oil sector needs investments.
Azerbaijani president said that last year the world experienced the highest percentage of drop of investments in the oil sector.
"So, without that the price will definitely go up," he said.
Ilham Aliyev added he believes that for companies, for investors, for governments, the price at $60-70 per barrel will be perfect.
When asked about the possibility of oil prices rising again, sometime by 2017, Ilham Aliyev agreed that it is indeed possible.
"This second half of this year will be the period of stabilization, and I hope that we can see the growth," President Aliyev said.