Azerbaijan, Baku / corr Trend A.Badalova, I.Khalilova / The Asian Development Bank (ADB) has updated the forecast on the increase of the Consumer Price Index (CPI) in its Asian Development Outlook 2007 (ADO 2007) Report for 6 of 7 Central Asian countries (except Tajikistan), ADB reports.
ADB expects the inflation to accelerate more quickly in Central Asia. The ADO 2007 forecast of 8.6% for 2007 is revised up to 9.7%. A major contributor of this increase is Azerbaijan, where oil revenues are boosting spending. However, a more general pattern of modest upward revisions is discernible. Strong foreign exchange inflows and higher public spending are lifting inflation rates, the reports said.
Inflation in five countries is on the rise due to rapid monetary expansions resulting from strong foreign exchange inflows and greatly expanded public spending.
In Azerbaijan, 12-month consumer price index inflation rose to 15.2% in July 2007, driven by a loose fiscal policy, unsterilized interventions in the foreign exchange market, and upward adjustments in administered prices. In Kazakhstan, larger bank borrowing than last year has lifted domestic demand and inflation. Upward adjustments in administered prices were the main factor in raising inflation in Tajikistan. Uzbekistan's officially reported inflation rate for the first half of 2007 was 2.2%.
Full-year inflation, too, is adjusted upward, from 14% to 18% in 2007 and from 10% to 15% in 2008. Excessive expansion in public spending and the money supply has fanned inflation pressures and, as expected, pushed inflation into double digits in January-June 2007. The central bank has tried to tighten the monetary policy and is allowing the manat to appreciate gradually, but this by itself is unlikely to rein in inflation, the ADB experts said.