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Non-monetary measures implementation restricts inflation risks in Azerbaijan – analyst

Economy Materials 29 July 2022 14:33 (UTC +04:00)
Non-monetary measures implementation restricts inflation risks in Azerbaijan – analyst
Kamran Gasimov
Kamran Gasimov
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BAKU, Azerbaijan, July 29. Previous increases in the refinancing rate, a stable exchange rate of the Azerbaijani manat and implementation of non-monetary measures by Azerbaijani government restrict inflationary risks in country, Deputy Head of the Market Analysis Department of the Russian Gazprombank, economic analyst Gulnara Khaidarshina told Trend.

According to her, the Gazprombank's forecast says Central Bank of Azerbaijan (CBA) will leave the refinancing rate unchanged (level of 7.75 percent) at the forthcoming meeting on July 29.

“The balance of risks in Azerbaijan’s economy has not changed significantly and remains biased towards accelerated inflation since previous meeting, when CBA kept the rate at 7.75 percent,” Khaidarshina said.

"Inflation remained outside the CBA's target range (4 percent plus/minus 2 percentage points) in June, exceeding its upper limit by 820 basis points and the refinancing rate by 645 basis points," she added.

“The CBA, following the results of meeting held in June, noted that the current account surplus and the strengthening of the nominal effective exchange rate significantly limit imported inflation despite the acceleration of inflation in countries - trading partners," the analyst said.

According to Khaidarshina, there is no serious growth in dollarization despite the negative level of the real rate, and the dynamics of deposits in manat (Azerbaijan’s national currency) remains stable.

"According to the CBA data, the volume of household deposits in manat slightly (by 1.9 percent) decreased in May. The dollarization of household deposits slightly increased (up to 41.2 percent) in May despite increased external risks, but remains at 1.9 percent, and one percent below the local high recorded in March," she noted.

Analyst also said that a serious increase in dollarization of deposits is one of the factors of potential pressure on the sovereign ratings of Azerbaijan, designated by the leading rating agencies.

“We believe that the absence of a pronounced upward trend in dollarization gives the CBA an opportunity to extend the pause in raising the rate, and focus on non-monetary anti-inflationary measures together with the government," Khaidarshina added.

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