Weekly economic review (Dec.14-18)

Analysis Materials 21 December 2015 17:18 (UTC +04:00)

Azerbaijan has no plans to revise budget forecasts for 2016

The government of Azerbaijan doesn't plan to revise the state budget forecasts for 2016, despite the fact that the price for Azerbaijani oil on global markets slightly exceeded $39 per barrel Dec.15.

In fact, the current price for Azeri Light, the main export grade of Azerbaijani oil, is even lower than the most pessimistic forecast of the Azerbaijani government. The budget forecasts for 2016 were prepared considering three scenarios: the pessimistic scenario, which envisages the price of oil at $40 per barrel, the base scenario - at $50 per barrel and the optimistic one - at $60 per barrel.

Given the expectations of major international organizations, including the World Bank (WB), which predicts the price of oil at $51 per barrel for 2016 (IMF - $50.4 per barrel, the Economic Cooperation Organization - $50 per barrel, Goldman Sachs - $49.5 per barrel, Moody's - $43 per barrel), the government considers the available forecasts acceptable. Thus, the pessimistic scenario of the Azerbaijani budget allows adhering to the forecasts without adjustment in 2016 as well if current prices remain.

Due to the fall in oil prices, revenues of oil companies declined, and as a result, income from tax on profits from the Azerbaijan International Operating Company (AIOC), which develops Azeri-Chirag-Guneshli block of fields, where Azeri Light is produced, amounted to 693 million manats in 2015 versus the forecasted 800 million manats.