Expert talks base oil price in Azerbaijan’s state budget in 2020

Finance Materials 7 January 2020 15:15 (UTC +04:00)
Expert talks base oil price in Azerbaijan’s state budget in 2020

BAKU, Azerbaijan, Jan. 7

By Eldar Janashvili - Trend:

The base oil price set in Azerbaijan’s state budget in the amount of $55 is acceptable, economy expert, Professor of Azerbaijan’s State University of Economics Elshad Mammadov told Trend.

Mammadov said that the cut-off price can be revised to $60 per barrel, given more favorable global environment.

“I think this is quite justified, since the gold and foreign exchange reserves and the need to increase state budget expenditures generally compel a higher price to be set,” the professor noted. “I believe that the set price isn’t high in this regard, because Azerbaijan’s economy needs a sharp increase in capital investments and, at the same time, a sharp increase in social expenditures.”

“With regard to the structure of budget revenues, the predominance of oil revenues is both adequate and justified, since the oil sector provides the basis for national income and the fiscal burden on the hydrocarbon spheres should be adequate to its role in the economy,” Mammadov added.

Further, the expert expressed an opinion on the risks for the national economy this year.

“This includes external risks, given that Azerbaijan’s economy depends on the situation with energy prices, in particular oil prices,” said Mammadov. “For example, if any problem arises within the OPEC+ format, or other factors will lead to the decrease in oil prices, this will definitely negatively impact the national economy. However, from the short-term perspective, Azerbaijan has substantial reserves and the government along with the Central Bank have leverages to stabilize the situation.”

“I believe that in 2020, we should expect an increase in demand for gold as a reserve asset,” the expert added. “At the same time, the US dollar will strengthen because of the protectionist policy of the US, due to which the US will withdraw its dollar mass from other markets and, as a result, global demand for the dollar will increase.”

“From the long-term perspective, the demand for the dollar will fall, and we will witness new configuration in the global foreign exchange market with the active participation of regional currencies and digital assets,” Mammadov noted. “Meanwhile, current oil prices aren’t market ones, but are administratively regulated. In particular, the OPEC+ format restrains the fall in oil prices. If oil price is formed on the basis of fundamental economic laws, we should expect a long-term trend of decrease in oil prices.”