BAKU, Azerbaijan, March 3
By Eldar Janashvili – Trend:
Azerbaijan can maintain a positive current account balance at an oil price which is 27 percent less than that envisaged in the budget, Executive director of the Azerbaijani Center for Analysis of Economic Reforms and Communication Vusal Gasimli said.
“A change in the oil price by $1 per barrel reduces the current account of operations by about $250 million per year,” Gasimli added, Trend reports on March 3.
“Taking into account that the Azerbaijani budget for 2020 is estimated at a price of $55 per barrel, the positive current account balance will remain at the same level even at an oil price of $40-45 per barrel,” the executive director said. “The economic immunity will work uninterruptedly even at the price below $30 per barrel.”
Gasimli stressed that if not coronavirus itself, then its psychological and economic influence in the world has already reached the limit of a pandemic.
“In particular, according to the Organization for Economic Cooperation and Development, the real forecast for global economic growth at the level of 2.9 percent decreased by twofold and amounts to 1.5 percent due to the influence of coronavirus,” the executive director said.
“As there is less demand for oil in China, the world's biggest oil importer, oil prices have also fallen,” the executive director said. “From January up till now, Brent crude oil has fallen in price by 26 percent and is sold at $51 per barrel while a barrel of Light oil - $46.”
Other spheres of the global economy were affected, Gasimli added. Thus, according to the International Air Transport Association, more than $29 billion is expected to be lost this year due to a decrease in the use of air transport and a fall in demand for air travel.
“The fact that Chinese tourists have not visited Europe since January has dealt a blow to the European tourism sector by about a billion euros,” the executive director added. “The closure of a car factory in China’s Hubei province, which is one of the five major automobile manufacturing centers, also dealt a major blow to this sphere.”
“In general, given China’s big share in the global value chain, it is predicted that the manufacturing process will suffer in many sectors and the main reason for this is that China’s manufacturing process drops up to 60-80 percent below the norm,” Gasimli said. “Moreover, two-week quarantine of each driver from China has a negative impact on the overall production and, thus, productivity, reducing the speed of turnover,” the executive director said.
Gasimli went on to say that in this situation, the greatest external risk for the Azerbaijani economy is the cheapening of oil price, as the main exported product, holding about 93.3 percent of the country's total export volume.
“Nevertheless, the Azerbaijani government, business and the population from an institutional and psychological point of view are prepared for oil pricing,” he added.
The executive director noted that oil prices fell by more than three times in 2015 and Azerbaijan successfully overcame this stage, continuing to be the most economically developed country in the region.
“Presently, such a sharp decline is impossible. Moreover, this also testifies to the absence of big inflationary threats and concern about the manat rate," he added.
“During the first two months of this year, oil prices were on average higher than $60 per barrel. As a result, the reserves of both the Central Bank and the State Oil Fund of Azerbaijan increased. The Central Bank's reserves increased by 243 million manat ($142 million) from January through February 2020. Thus, a surplus of funds beyond the forecast may compensate for losses during several months after oil prices fall below the forecasted level,” Gasimli said.
"The Azerbaijani state budget revenues amounted to 1.8 billion manat (over $1 million), while expenditure - 1.4 billion manat ($823 million) in January 2020,” he said. “The budget not only did not decrease, but also has a surplus of more than 400 million manat ($235 million) in January 2020."
“The operative data of the tax and customs bodies from January through February 2020 also show that more funds are transferred to the budget than it was envisaged in the forecast,” the executive director noted.
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