GENERAL ECONOMIC SITUATION

In January to August 2006 the GDP grew 34.4% and made up 10,296.7m AZN at current prices. The growth pace turned out 14.2% more than 2005.

Major factor causing such considerable rise of economic growth pace was the sharp rise in industry. Growth pace of industrial production went up in this period and attained 40.5% and comprised 8411.6m manats. Last year the figure was 26%.

The growth was possible at the expense of commencement of the bulk oil production from the Azeri-Chirag-Gunashli fields. The highest growth pace was fixed in the history of industrial development in the country. The oil production grew 48.5% and comprised 75% of the total industrial output. Rise in industrial production was observed in oil production by 50.4% and it comprised 20,173 million tons, whereas gas production was 4,397 billion cu m amid 24.4%-rise.

Moreover, rise in industrial production was observed in the non-oil sector (7.9%), including the chemical industry (rise by 23.8%), furniture production (31.3%), food production (4.9%), transport conveyances and devices (2.9%), metallurgical industry (34.5%), other non-metallurgical mineral substances (6.7%), etc

The growth of production in the agrarian sector rose 0.7% in 2006 against 6.5% in 2005.

The investments put in major capital rose inconsiderably. A total of 3623.9m AZN was invested in economy, which is 11.7% up as compared to 2005 when it was 11.4%. The major reason for rise in investments is growth in demand by the construction of industrial facilities in this sector, where 85.7% of all investments was spent.

Thus, growth pace of consumer demand rose. The turnover of retail good turnover rose 12.5%, while the community services grew 38.9%. The growth pace of commercial services increased, while in the retail goods turnover fell, as it seems on the results of the first 8 months of 2005, when the rise comprised 12.4% and 21.3% respectively

Sources: State Statistics Committee, calculations by Trend

Major part of demand was satisfied at the expense of export, which grew by 70.47 and comprised $3658,094m. The volume of import made up $3345,819m, or 14.47% up as compared to last year. The foreign trade ended in balance with $312,275m in black.

Major reason for cut in import operations was drop in the amount of import of equipment, technical rigs and spare parts for them, ware of ferrous metal, natural gas, grains, transport conveyances for dry cargo.

Growth pace of consumer prices fell and made up 0.3% in August, whereas in June it was 0.1%. However, CPI rose 9.6% in respect to July 2005. Cut in the pace of inflation was conditioned with a rise in prices of foodstuff by 0.6% against 0.3% in May.

The CPI rose 10.2% as compared to August 2005. Cut in inflation pace is explained with the growth pace of prices. The foodstuff prices fell 0.1% in August against 0.6% in July.

In August price of food dropped 7.3%, vegetable 1.9%, alcohol drinks 0.5%, tobacco, kofe, tea, kakao 0.1%, while prices of meat products rose 0.8%, fish and beer 0.2%, diary, eggs and cheese 3.1%, bread 0.5%.

Over the first 8 months of 2006 the consumer prices of goods and tariffs of services grew 6.9% as compared to previous year. In this period the growth pace of prices of the foodstuff was 9.6%, while non-food goods 4.8% and tariffs of services 2.5%.

As a resul of January to August nominal incomes of the populaton rose 20.6%, and comprised 6536.9m manats. The net incomes rose 0.5% as compared to last year.

Major tendency in the fiscal market in the first half-year was the consolidation of manat rates in the respect to US dollar. The IMF forecasts the maintenance of consolidation of the naionla currency in respect to US dollar reflects real state and is linked with rse in the cuntry's oil revenues.

As a result of the policy conducted over the 8 months of 2006, the national curtency rose 4.1%, while in 2005 the manat became consluaed by approximately 5%. Ove the first 8 months the NAB;s partciat the curency marke was n the level of $418m.