Significant Increase in Inflation Forecasted for Azerbaijan
Azerbaijan, Baku /corr. Trend I.Khalilova / The Government of Azerbaijan has forecasted that the growth of the index of consumer prices will be up to 14% in 2008, a Government source stated.
The growth will take place as a result of the expansion of the circulating money resulting from the huge flow of foreign currency and huge public expenditures. The dollar mass flows into the country have grown due to huge oil revenues. In addition, the Government forecasts a 32.5% increase of budget expenditures for the next year.
The Asian Development Bank (ADB) has updated its forecast on the increase of the Consumer Price Index (CPI) in its Asian Development Outlook 2007 (ADO 2007) Report for six out of seven Central Asian countries. 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 circulated money 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.
In Azerbaijan, the twelve-month consumer price index inflation rose to 15.2% in July 2007, driven by a loose fiscal policy, non-sterilized interventions in the foreign exchange market, and upward adjustments in administered prices.