IMF Forecasts Rise in Inflation in Oil Exporting Countries
Azerbaijan, Baku / corr Trend I.Khalilova, A.Badalova / In 2008 the growth pace of inflation in Azerbaijan is forecast at 17% against 16.6 this year, according to the regional economic review by the International Monetary Fund (IMF) for Near East and Central Asia for October.
Average inflation in MCD countries has picked up and is expected to be about 8? percent in 2007. This largely reflects rising inflation in oil-exporting countries, where average inflation is expected to jump to 10 percent, from 7 percent in 2006.
Azerbaijan, Iran, Libya, and Qatar could face double-digit inflation, mostly reflecting pressures from increased domestic demand, including from hikes in public sector wages, and supply constraints. In Iraq, inflation has halved, reflecting the gradual appreciation of the exchange rate and control of government spending, but is still high at about 30 percent.
Real effective exchange rates continued to appreciate in all MCD country groupings through 2006 (Figures 11 and 12). Among oil exporters, Iran, Qatar, and Syria (all with pegged regimes) 15 have had double-digit cumulative real appreciation during 2005-2006, mainly because of high inflation; in Azerbaijan, the large real appreciation during the same period was attributable to a combination of nominal appreciation and high inflation.
One of factors affecting the increase of inflation is the increase of money mass in circulation and pubic expenses. The expansion of money mass in Azerbaijan will rise by 65% as compared to 79% in 2007.
In 2008 the country's fiscal balance will comprise 30.3% of the GDP as compared to 4.5% in 2007. The public budget in incomes (excluding grants) will constitute 58.9% of the GDP next year as compared to 33.1% this year.
The non-oil fiscal balance will decrease by 45.7% of the non-oil GDP as compared to 40.8% in 2007. Incomes of the combined budget from the non-oil sector will comprise 31.9% in 2008 like in 2007.
The total public expenses and net investment will make up 28.5% of the GDP in 2008 as compared to 28.6% in 2007.
According to forecasts the public arrears will reduce to 9.2% of the GDP in 2008 as compared to 10.3% in 2007. The gross foreign debt will reach 8.4% in 2008 as compared to 9.5% this year.