In compliance with the forecasts of the International Monetary Fund, the economic rise in Azerbaijan might comprise 26.2% in 2006 and exceed the last year figure (24.3%). It was possible through considerable rise in oil production, Trend reports cutting a report by the IMF. The IMF experts assure that the short-term outlook for real GDP growth is favorable, but keeping inflation in single digits represents a major challenge.
In 2006 rise in the consumer price index by 12% against 5.5% last year. The National Bank of Azerbaijan refused from connecting manat to the dollar in 2005 and toughened the monetary policy before new establishing fixed currency rate in September, the IMF said.
Rise in oil prices and increase of export enabled to cut in deficit in the current payment balance from 30% of the GDP in 2004 to 5.32% in 2005. The surplus of the current account is expected in the level of 17.7% of the GDP in 2006.
They stressed that the current favorable prospects provide a unique opportunity for supporting economic diversification. Directors commended the prudent fiscal and monetary policies, and progress in some areas of structural reforms that had contributed to this outcome, with economic growth spurred by a significant increase in oil production and the spillover effects of oil-related investment on the non-oil economy. Over the medium-term, the main challenge will be to manage the temporary boom in oil production. In this regard, they recognized that a significant increase in oil revenues during the next five years will lead to large external current account and budget surpluses. In this context, Directors stressed the importance of formulating a medium-term fiscal strategy, incorporating estimates of Azerbaijan's hydrocarbon wealth, to ensure the long-term sustainability of public finances and to avoid excessive real exchange rate appreciation that could undermine the competitiveness of the non-oil economy.