Correction of Azerbaijan’s Macroeconomic Forecasts for 2008 Inevitable – Minister

Azerbaijan, Baku, 13 June / Trend corr I. Khalilova/ "Azerbaijan's Economic Development Ministry is going to reconsider macroeconomic forecasts for 2008 as a result of first half year indices," Economic Development Minister Heydar Babayev said on 13 June.

Inflation forecast are also planned to be changed along with GDP forecasts.

"Inflation was forecasted without taking into consideration world tendencies, but the main thing is that public budget correction to increase was not taken into account, therefore, its impact on inflation is also evident," he said.

Prices for consumer goods and services increased by 3.1% in April from March 2008 and by 17.8% in January to April from the same period of last year. In four months inflation grew by 10.9%.

According to Babayev, other changes in macroeconomic forecasts will also be connected with correction of budget indices for 2008.

"Evidently, the budget should not grow with such rates, but social problems are also involved here as can nit explain the Azerbaijani people that we will not build hospitals, roads and other infrastructure because of the threat of inflation and heavy absorption of the domestic money," minister said. "Therefore it is important to make choice between high inflation or capital investments. Furthermore, we have inflation caused by the European tranches (it made up 2.3%in France)," the minister said.

According to early estimations, the real growth rates of GDP are expected to make up 20% as a result of 2008 (totalling to AZN32.7bln) against the established 18.2% (AZN31.246bln). The growth will be mainly caused by the non-oil sector as a result of 2007. In 2007, the growth of the non-oil GDP was expected at 8%, but it totalled to 11.3% which necessitates the correction of forecast for 2008.

According to new forecast of the Ministry of Economic Development, real growth of GDP in non-oil sector is expected to total t 11.6% against the earlier established 10%.

As a result of 2008, the oil GDP is expected to make up AZN23.6bln if the oil prices retain their current level (over $100) while it was forecasted at AZN18.6bln earlier.

The specific gravity of GDP per head will go up by $4,600.

Investment expenditures are planned increase by over AZN 1.5bln, as the Government intends to complete structural innovations faster.

On 13 June, official exchange rate totalled 0.8189 AZN/USD.

The correspondent can be contacted at [email protected]

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