BAKU, Azerbaijan, Jan. 21
By Sadraddin Aghjayev – Trend:
The Central Bank of Azerbaijan (CBA) is acting prudently and raising the rate, thoroughly assessing the balance of risks to curb inflation and avoid a slowdown in the economy, Deputy Head of the Market Research Department at the Russian Gazprombank Gulnara Khaidarshina told Trend.
Khaidarshina added that the problem of accelerating inflation has acquired a global scale and is typical not only for Azerbaijan but also for other CIS countries, as well as the largest economies.
“The central banks are doing everything to help slow down inflation by monetary methods, primarily by raising key rates, which helps to curb inflationary expectations of the population and maintain the attractiveness of bank deposits in the national currency,” deputy head of the department said.
Khaidarshina stressed that in this regard, the CBA is acting prudently and raising the rate, thoroughly assessing the balance of risks to curb inflation and avoid a slowdown in economic growth.
“Taking into account that it is difficult to influence certain pro-inflationary factors (primarily related to the supply of goods on the market) through the rate, additional, non-monetary measures may be required in the short term,” deputy head of the department said.
Khaidarshina added that now many CIS countries are implementing additional, non-monetary measures to combat inflation.
“These measures include the reduction of import duties on certain groups of goods (as a rule, socially significant goods), and state regulation of prices for food products and energy resources, and the improvement of logistics within the country by creating food stocks,” deputy head of the department said.
Khaidarshina said that some CIS countries also restrict the export of food and energy products.
“For example, Kazakhstan has limited export of grain while Uzbekistan – export of gas,” the deputy head of the department said.
“In the current situation, additional measures of curbing inflation can help the CBA cope with the difficult task of slowing inflation to the target levels,” Khaidarshina stressed.
The deputy head of the department said that indeed, the disruption of supply chains and the rise in the cost of logistics were important factors in imported inflation.
“We have been observing the gradual reversal towards a slowdown in both global food prices and China's producer price index since November 2021,” Khaidarshina said. “The main factor is the realization of last year's high base effect, which will intensify by May.”
The deputy head of the department said that moreover, the cost of maritime container transportation is being gradually normalized.
“Among other factors hindering anti-inflationary measures, I would like to stress the stimulating budgetary policy being pursued in most CIS countries,” Khaidarshina said.
“Fiscal stimulus was required to ensure the speedy recovery of the economy after quarantine measures at the initial stage of the COVID-19 pandemic,” Khaidarshina said.
The deputy head of the department said that Azerbaijan is not an exception and is also pursuing an expansionary fiscal policy.
“At the same time, excess liquidity in manat is sterilized by the CBA through the issuance of short-term notes,” Khaidarshina said. “This allows avoiding pressure on the manat and limiting the monetary factors of inflation.”
“According to our forecasts, in case of an additional increase in the refinancing rate at the upcoming meetings of the CBA and the implementation of additional non-monetary measures, inflation rate in Azerbaijan will stabilize in the first quarter and slow down in the second quarter,” Khaidarshina stressed. “It may reach about seven percent by the end of the year, which is rather close to the upper limit of the CBA’s target corridor of four +/- two percentage points.”
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