BAKU, Azerbaijan, March 30. The Central Bank of Azerbaijan (CBA) lowered the refinancing rate from 7.75 percent to 7.5 percent this week, Trend reports.
The upper limit of the interest rate corridor was reduced from 8.75 percent to 8.5 percent, while the lower limit was kept unchanged at 6.25 percent.
"This decision was taken taking into account the comparison of actual and projected inflation with the target (4±2 percent), stabilization of inflation expectations, and changes taking place in the balance of risks. Reduction of the upper boundary of the interest rate corridor and the discount rate, taking into account the preservation of forecasted inflation at the target level, is aimed at easing monetary conditions.
Keeping the lower boundary unchanged serves to optimize the width of the interest rate corridor. When determining these parameters of the interest rate corridor, the scale of their impact on interest rates in the interbank money market was also taken into account," the commentary of the CBA reads.
The CBA also noted that further decisions to ease monetary policy will depend on the sustainability of the downward trend in inflation, the dynamics of demand and supply factors of external and internal origin.
“If these risks materialize, we can consider the possibility of lifting the pause on easing monetary policy for the remainder of the year. In the coming period, monitoring of macroeconomic indicators and parameters of the interest rate corridor in percentage terms will also be carried out,” the commentary added.
Besides, the CBA has maintained its inflation forecast. Thus, the inflation forecast for 2024 has remained unchanged from January of the current year (5.3 percent).
This week, the bank held a media briefing in connection with the announcement of the balance of payments report.
Thus, the briefing noted that Azerbaijan invested $3.1 billion to other countries in 2023, of which $1.87 billion fell on net investments.
The top three countries in terms of FDIs from Azerbaijan include Türkiye - $1.8 billion, the US - $311 million, and the UK - $157 million.
The briefing also noted that FDI in Azerbaijan's economy amounted to $6.7 billion last year, up 6.1 percent.
In the first quarter, the volume of FDI in the economy of Azerbaijan amounted to $1.5 billion, in the second quarter - $1.4 billion, in the third quarter - $1.3 billion, and in the fourth quarter - $2.2 billion.
The top five leading countries in terms of FDI in Azerbaijan's economy include the UK - $1.9 billion, Türkiye - $1.3 billion, Cyprus - $791.5 million, Russia - $617.3 million and Iran - $395.9 million.
The volume of remittances to Azerbaijan from abroad amounted to $1.66 billion in 2023.
The top five leading countries in terms of remittances to Azerbaijan include Russia - $1.04 billion, Türkiye - $164 million, US - $73.8 million, Georgia - $37.5 million, and UK - $33.2 million.
Moreover, the current account surplus of Azerbaijan's balance of payments amounted to $8.3 billion last year (11.5 percent of GDP). The surplus for the oil and gas sector amounted to $17.09 billion (40.4 percent reduction), while for the non-oil and gas sector, the deficit amounted to $8.76 billion (68.9 percent growth).
CBA has also prescribed Azerbaijan Industrial Bank OJSC to take measures to improve internal procedures.
This week, Trading Economics analysts predicted average annual inflation in Azerbaijan in 2024 at five percent.
According to Trading Economics forecasts, average annual inflation in the first quarter is expected to be 1.8 percent, at the end of the second quarter - 4.4 percent, third - 5.3 percent, and fourth - five percent.