BAKU, Azerbaijan, Apr.30
By Zeyni Jafarov - Trend:
The Central Bank of Azerbaijan (CBA) will decide to prolong the suspension of the cycle of reducing the refinancing rate at least until the end of 2021 and maintain it at 6.25 percent following the upcoming meeting to be held on Apr.30, Gulnara Haydarshina, Deputy Head of the Market Analysis Department of Gazprombank, told Trend.
According to Haydarshina, the main arguments in favor of such a decision can be considered emerging signs of economic recovery and its return to growth in the second quarter of this year.
She noted that the decline in Azerbaijan's GDP in the first quarter of this year softened to 1.3 percent, which was due to a return to growth in the non-oil sector of the economy supported by fiscal incentives, as well as an increase in gas exports to Europe via the TAP pipeline.
In the first quarter, the non-oil sector of the Azerbaijani economy grew by 2.1 percent, and this made it possible to partially compensate for the decline in the oil and gas sector, said Gazprombank’s representative, adding that the budget in 2021 will be an incentive and its deficit will expand to 4.1 percent of GDP to ensure a speedy economic recovery.
“At the same time, fiscal incentives will have an increasing impact on the monetary base. This is evidenced by the observed growth of the liquidity surplus in the banking system. In order to maintain macroeconomic stability from the beginning of 2021, the Central Bank expanded the set of tools for sterilizing excess liquidity. Besides the 28-day notes, it was decided to hold auctions for 84, 168, and 252-day notes,” Haydarshina also noted.
Besides, according to her, in the first quarter, Azerbaijan's budget was executed with a surplus of 1.1 percent of GDP and the peak of spending hasn’t yet come. In this regard, in the near future, the stimulating role of the budget will increase.
“Taking into account the indicated factors, the Central Bank of Azerbaijan will keep the refinancing rate at 6.25 percent. At the same time, given the economic recovery and the leading role of fiscal incentives, we don’t exclude a decision from the Central Bank to suspend reducing the rate at least until the end of the year,” she concluded.
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