Baku, Azerbaijan, Feb. 14 / Trend /
Ellada Khankishiyeva, Trend Analytical Centre Head
Savings policy of Azerbaijan's population in 2011 significantly changed. These changes were not only quantitative but also qualitative, indicating the positive processes in the socio-economic life of Azerbaijan amid negative processes in the global economy.
According to the Central Bank of Azerbaijan (CBA) the volume of deposits of individuals in banks in Azerbaijan exceeded 4.119 billion manat in 2011, which is 36 percent higher compared to 2010 (over 3.029 billion manat). Of this total volume of deposits, over 2.281 billion manat (55.4 percent) were placed in the national currency - manat and over 1.838 billion manat (44.6 percent) - in foreign currency.
First of all, growth of deposits of the banking sector on deposits of population by almost 40 percent attracts attention in this statistics. Such a high growth speaks about restoration of the lost confidence of consumers in banks in the country. And there are reasons for this.
First of all, the Azerbaijani banks grow and get stronger. Currently, there are active changes in the banking system; there are processes of its improvement, consolidation and restructuring of banks, the optimization of the number of banks in order to create more healthy banks, development of infrastructure of financial markets, and expansion of services. Competition between the banks for investors goes in the sphere of providing customers with the most favorable conditions of service, the parallel provision of other banking products on preferential terms, holding of promotional activities aimed to attract their attention.
Second, the deposit insurance system, operating in Azerbaijan since August 2007, also contributed to the growth of individual deposits in banks in Azerbaijan. Azerbaijan Deposit Insurance Fund is working to protect bank deposits of the population from the threat of bankruptcy and other financial disasters. During the fund's activities the amount of insurance coverage of deposits increased from 4,000 to 30,000 manat.
Third, citizens of Azerbaijan are gradually moving away from the primitive methods of saving money and banking and beginning to see the benefits of investing available assets. For most people, a bank deposit is a conservative tool with a guaranteed income, such as investing in securities Azerbaijani citizens associate with certain risks.
Fourth, rising incomes of the population play an important role in increasing the size of individual deposits in banks of Azerbaijan. According to State Statistics Committee, in 2011 nominal income of the population of Azerbaijan exceeded 30.633 billion manat, which is 19.6 percent more than in 2010. During this same period, nominal income per capita grew by 18.1 percent and exceeded 3,383 manat. Thanks to the socially oriented programs, and the decrees of the Government, the pace of income growth in 2011 exceeded the growth rate for this indicator in 2010. For example, in 2010 nominal income rose by 13.3 percent, while per capita incomes - by 11.9 percent.
The second attractive part of the Central Bank's statistics on the population's deposits is the excess of manat deposits of Azerbaijani citizens over the deposits in foreign currency. This situation was observed three times in 2011: in August, November and December. This gives reason to forecast a new appearing trend in the deposit-base of the banks in the country.
The volume of physical entities' deposits in Azerbaijani banks in August 2011 amounted to 3.660.7 billion manat, of which 1.837.7 billion manat (50.2 percent) were placed by the population in the national currency - manat, 1.823 million manat - in freely convertible currency, in November - 1.970.1 billion manat (51.4 percent) were placed by the population in manat, 1.859.9 billion manat - in freely convertible currency. It was mentioned that the share of manat deposits and foreign currency deposits in total amount of physical entities' deposits amounted to 55.4 percent and 44.6 percent respectively as of December.
A stable exchange rate of the Azerbaijani national currency must be stressed amid the unstable dollar and the euro. This allowed the population to prefer manat compared to all other currencies. It should be noted that there was panic among Azerbaijani investors, when devaluation of national currencies compared to the dollar occurred in many CIS countries in 2009. The expected devaluation in the country forced the citizens to exchange invested manat for dollars, and some even removed the deposits.
According to the forecasts of the Azerbaijani government, the average rate of national currency compared to the U.S. dollar till 2015 will continue unchanged - at 0.79 manat. The gradual strengthening of the manat is forecasted compared to the euro: in 2012 - by 0.26 percent, in 2013 - by 2.77 percent, in 2014 - by 1.68 percent and in 2015 - by 0.41 percent.
The only thing that can prevent further growth of deposits is a rise in inflation and real strengthening of the manat rate, not allowing investors to earn on their investments in bank deposits. But non-admission of strengthening the real national currency rate and inflation growth are the main objective of the Azerbaijani Central Bank.
The higher interest rates will stimulate the growth of deposits. There were no significant changes in nominal interest rates on loans and deposits in 2011, as opposed to the real rate. Thus, the average interest rate on deposits was 11 percent. According to the CBA, the average rate on bank deposits of physical entities in the national currency was 10.76 percent, while real interest rate (excluding annual inflation at 7.9 percent) - 2.86 percent. The interest rate on deposits in freely convertible currency amounted to 11.27 percent, while real interest rate (taking into account the strengthening of the Azerbaijani manat by 1.4 percent) - 9.87 percent.
Today's deposit market rather differs from what it was several years ago. One of its developments is that investor is interested in deposits, giving a maximum income, but also additional service options: Internet, telephone banking, integration with payment Internet systems, etc.
The official exchange rate is 0.7861 AZN/USD on Feb. 14.