According to the World Bank's forecasts for 2007, there will be a 17% rate of inflation in Azerbaijan. Gubad Ibadoglu, the Chairman of the Economic Researches Center, made this statement referring to WB's Partnership Strategy with Azerbaijan in the period from 2007 to 2010.
Mr. Ibadoglu said that the growth rate of consumer prices in the country will be in double figures this year due to an increase in prices of energy resources and tariffs of communal services.
To conform to the National Bank of Azerbaijan's econometric model of calculation of inflation over the first half-year of 2006, an impact of administratively regulated prices on inflation remained at 50%.
Mr. Gubadoglu noted that the current conditions of inflation price rises may be non-regulated. Due to the special weight of electricity in production being 35-40%, considerable influence of the price rise will be felt in the agriculture sector.
This imbalance between community income and the current rise might cause dissatisfaction amongst the people in Azerbaijan, because 95% of the Azerbaijani population is involved in the agriculture sector. In cases where there is a 2- or 3-fold rise in communal services tariffs and 50% price of energy resources in 2007, the Government forecasts a rise of 20% in salaries and 40% in social security expenses. In addition, AZN 150mln has been put in the 2007 public budget for social security, while the Treasury will obtain AZN 200mln through the price. The Government therefore intends to compensate these expenses at the expenses of payments remitted by the community consumers.
According to a member of the Center, Azer Mehdiyev, the rise in prices will also impact on the development of agriculture, the growth rate of which have gone down over the past few years. In 2003 special weight of this sector in GDP made up 15%, in 2005 it dropped 9%, while over 11 months of 2006 it fell by 5%.
He also said that the measures taken previously will lead to the consolidation of monopoly. The red-taped mechanism on the issue of credits from the National Fund of Azerbaijan to support businesses also promotes it, because in accordance with the new rules, the entrepreneurs' access to SOFAR's finances will be complicated. Thus, term of credits issued in the amount from AZN15, 000 to 30,000 is reduced from 5 to 2 years.