Double consequences of euro decrease for Azerbaijan

Double consequences of euro decrease for Azerbaijan

Azerbaijan, Baku, Jan. 11 / Trend /

Ellada Khankishiyeva, Trend Analytical Centre Head

The European debt crisis is in full swing. It affects the course of a single European currency. The euro rate compared to the U.S. dollar dropped from $ 1.2778 to $1.2738 per euro on Jan. 11 after trading the day before. According to the auction, the euro rate declines compared to the dollar amid the expectations for data on Germany's GDP for 2011 and the placement of debt securities by Italy and Spain this week.

However, despite the decline the European currency remains significantly higher than the dollar.

The unstable position of the euro has a double meaning for Azerbaijan. On the one hand, it is known that about 30 percent of the country's total imports fall to the goods from the eurozone. The goods imported from the euro zone have mainly the investment destination. Therefore, first, the cheapening of euro leads to a drop in prices for industrial equipment. This can keep inflation in the country at the one level.

On the other hand, the depreciation of the euro has undesirable impact on the production of Azerbaijani companies exporting their goods to Europe. The exchange rate of manat compared to the euro leads to the rise in the price on goods of these companies. It reduces the competitiveness of exported products in the markets of the Eurozone. One thing reassures that there are few products. Oil and oil products are sold in dollars.

The euro rate compared to manat has reduced by 1.6 percent since early 2012 (from 1.0178 manat to 1.0019 manat per euro as of January 11, 2012). It should be noted that the Azerbaijani Central Bank (CBA) completely abandons the use of dual currency (dollar / euro) basket while determining the exchange rate of manat. It has passed to bilateral (manat / dollar) exchange rate targeting since January 10, 2011.

The depreciation of the euro rate has a negative impact on the cost of Azerbaijan's strategic currency reserves. It is known that the CBA balanced the currency composition of the portfolio in 2008. At present, about 60 per cent of foreign currency reserves are in dollars, while the remaining 40 per cent in the euro and the pound / sterling. About 40 percent of the investment portfolio of the State Oil Fund of Azerbaijan is also concentrated in the euro.

But the factor that the Azerbaijani currency reserves are well diversified both in monetary and geographical structure, the threat of instability of euro currency does not pose a risk for the country. It should be noted that Azerbaijan did not observe any loss on this front even in the worst crisis period.

The decrease in euro has another minus for Azerbaijan. This is the suspension of the process of the debut issue of Eurobonds by the government till the situation on world markets is stabilized, that is for the indefinite period. Previously, these plans were delayed because of the global financial crisis. However, it should be noted that Azerbaijan was preparing to issue sovereign Eurobonds. The first issue of Eurobonds for the Azerbaijani government is more connected with the growth of the country's image and the access to European markets, rather than the need to borrow funds this way.

The analysts predict further fall of euro. The euro may fall to at least $ 1.20 for the next three months. The decline in the euro is quite reasonable, as the debt crisis in the eurozone is still acute.

Subscribe to Trend in Google News! Subscribe
Uzbekistan intends to increase dried fruit exports to China
Uzbekistan intends to increase dried fruit exports to China
Aligarh’s Areeba shoots to fame, breaks stereotypes about Muslim girls
Aligarh’s Areeba shoots to fame, breaks stereotypes about Muslim girls
France, Europeans working to open joint mission in Afghanistan - Macron
France, Europeans working to open joint mission in Afghanistan - Macron
Loading Bars
Erdogan discusses humanitarian aid with Red Crescent, Red Cross
Uzbekistan intends to increase dried fruit exports to China
No Omicron strain detected in Georgia - NCDC Head
Aligarh’s Areeba shoots to fame, breaks stereotypes about Muslim girls
Iran’s Bahar Azadi gold coin price skyrockets
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan confirms 1,406 more COVID-19 cases, 1,787 recoveries
Tactical exercises held in Azerbaijan's commando military unit - MoD (PHOTO/VIDEO)
New composition of Supervisory Board of Azerbaijan Industrial Corporation approved
Iran reveals COVID-19 data for December 4
President Ilham Aliyev sends congratulations to heads of Thailand, Finland
France, Europeans working to open joint mission in Afghanistan - Macron
Ranking of natural gas importers from Azerbaijan
Uzbek Commodity and Raw Materials Exchange reveals volume of its transactions
SOCAR Georgia Gas announces tender on gas stations restoration
Iran eyes increase in passenger transportation via Yazd Shahid Sadooghi Airport
Azerbaijan reveals oil exports to Canada in 10M2021
Weekly review of main events in Azerbaijan's transport sector
Turkmenistan’s president approves anti-crisis program for 2022
Azerbaijan’s liberated territories have high potential for solar energy - RES agency
Weekly review of key events in Azerbaijan's ICT sector
Russian company to help automate, digitalize processes in Uzbek energy sector
Iran reaches increase in load/unload operations in Shahid Bahonar port
Top 10 Azerbaijani oil importers
MFA reveals reason why Armenia-Azerbaijan ministerial meeting didn't take place
Kazakhstan talks construction of wind power plants in Kostanay region
Azerbaijan achieves practical results to restore hydropower plants in liberated lands - agency's CEO
Azerbaijan’s metallurgical company notes increases in steel production over 9M2021
Iran also to be able to take advantage of Zangazur corridor – ex-Iranian ambassador to Azerbaijan
Russia-UAE trade turnover hits fresh all-time high surpassing $4 bln - Mishustin
Kazakhstan’s Almaty Power Plants to buy pumping, ventilation equipment via tender
Azerbaijan discloses oil exports to Ukraine over 10M2021
Azerbaijan unveils volume of oil exports to Belarus in first 10M2021
Georgian Railway shares updated report on income within 9M2021
Azerbaijan’s 10M2021 oil exports to UK revealed
Kazakhstan to timely fulfill its obligations under COP26 – PM
Azerbaijan opens investment tender to privatize Sumgayit Construction Service company
Iran finds way to supply its far north, north-east provinces with gas
Georgia releases COVID-19 data for December 4
LUKOIL Uzbekistan Operating LLC opens tender for supply of shut-off and control valves
Mikheil Saakashvili not to be treated abroad – Georgia's minister
Russia offers Azerbaijan to switch to barcoding for fruit, vegetables exports
Tripartite gas swap deal with Turkmenistan, Azerbaijan, may help Iran kill two birds with one stone
Azerbaijan Mortgage and Credit Guarantee Fund issues record amount of loans in 10M2021
Goods movement across Azerbaijani-Russian border to be accelerated
Azerbaijani oil prices increase
Kazakhstan boosts trade with Romania over 9M2021
Weekly review of Azerbaijan's oil & gas sector
Weekly review of Azerbaijani precious metals market
Weekly review of Azerbaijani currency market
Treatment of servicemen injured in helicopter crash of Azerbaijan’s State Border Service continues
Turkey to support Azerbaijan in installing seismic stations in Karabakh
Iran aims to increase local solar power production
Gamaleya Center ready to accept state order for up to 10 mln sets of Sputnik M
Kazakhstan’s Intergas Central Asia to buy welding equipment via tender
Georgia’s export of oil products increases
India’s air defence gets a big boost, Russia starts delivery of S-400 missiles
India's defence procurement guided by national security interests: MEA
Uzbekistan shares domestic COVID-19 data for December 3
Iranian currency rates for December 4
Turkey's export product labeling changes
S.Korea reports record-high COVID-19 cases, deaths
Iran, China review cinematic cooperation
Georgia and Poland have potential for development of bilateral trade
Kyrgyzstan, Russia presidents hold telephone conversation
Japan PM Kishida likely to cancel U.S. visit due to Omicron
Militants kill at least 31 in central Mali, say local authorities
Tunisia confirms 1st case of Omicron variant infection
Turkey confirms 21,495 daily COVID-19 cases
France announces new travel restrictions
IMF chief says Omicron could dent global economic growth
France evacuates more than 300 people from Afghanistan
UK records more than 50,000 new coronavirus cases
Italy's economy projected to grow 6.3 pct this year
Kazakhstan decreases petroleum gas export to Hungary amid global pandemic
Militants kill 7 soldiers in Nigeria's northeastern Borno state
Iran nuclear talks adjourn, resume next week
South Africa hit by fourth COVID wave driven by Omicron
Budget for social rehabilitation and childcare to reach 52 mln GEL next year, Georgian PM says
Putin informs Erdogan on main results of Sochi trilateral meeting
Turkey introduces action plan to improve lives of the disabled
Construction of 50MW solar power plant underway in Kazakhstan
Azerbaijani FM, OSCE rep exchange views on OSCE Charter (PHOTO)
Human remains discovered in Caspian Sea and recovered - SOCAR
Iran highlights need for more customs cooperation with Pakistan
Volume of investments in construction of bp's power plant in liberated Azerbaijani lands revealed
Turkmen gas may be supplied to Europe via Caspian Connector project - ambassador
Turkish, Russian Presidents hold phone talks
Azerbaijan’s Pasha Holding talks about development strategy
Azerbaijan's Heydar Aliyev Foundation, UNICEF sign another memorandum of understanding (PHOTO)
Azerbaijan shares data on number of vaccinated citizens
Azerbaijani, Turkish military pilots conduct joint training flights in Baku (PHOTO/VIDEO)
Azerbaijan confirms 1,703 more COVID-19 cases, 2,180 recoveries
Turkmenistan can supply natural gas to European market until 2050 - ambassador
Azerbaijan discloses export volume of petroleum coke
Azerbaijan's Finance Ministry to auction gov't bonds via Baku Stock Exchange
SOCAR begins testing of new mobile diving complex
Israeli co Fireblocks raising $400m at $8b valuation
Croatia remains one of Russia’s key partners in EU
Value of goods transported via road increases in Azerbaijan
All news