General economic situation

In January to October 2006 the GDP grew 34.3% and made up 14,761,8mln AZN at current prices. The growth pace turned out 10.9% more than 2005.

Major factor causing such considerable rise of economic growth pace was the sharp rise in industry. Growth pace of industrial production went up in this period and attained 38% and comprised 11,706,6mln manats. Last year the figure was 30%.

The growth was possible at the expense of commencement of the bulk oil production from the Azeri-Chirag-Gunashli fields. The highest growth pace was fixed in the history of industrial development in the country. The oil production grew 44.6% and comprised 75% of the total industrial output. Rise in industrial production was observed in oil production by 47% and it comprised 26,009mln tons, whereas gas production was 5,539bln cu m amid 20.2%-rise.

However, growth pace in the agrarian production continues drop. Thus, in January to October the output dropped 2% as compared to 2005 when it was 7.2%.).

The investments put in major capital rose inconsiderably. A total of 4750.1m AZN was invested in economy, which is 15% up as compared to 2005 when it was 10.4%. The major reason for rise in investments is growth in demand by the construction of industrial facilities in this sector, where 86.2% of all investments was spent.

Thus, growth pace of consumer demand rose. The turnover of retail good turnover rose 12.7%, while the community services grew 40.9%. The growth pace of commercial services and the retail goods turnover increased, as it seems on the results of the first 10 months of 2005, when the rise comprised 12.5% and 21.6% respectively

Sources: State Statistics Committee, calculations by Trend

Major part of demand was satisfied at the expense of export, which grew by 40.74% and comprised $5,210,322mln. The volume of import made up $4,210,379mln, or 19.69% up as compared to last year. The foreign trade ended in balance with $999941.9mln in black.

Major reason for cut in import operations was drop in the amount of import of equipment, technical rigs and spare parts for them, ware of ferrous metal, natural gas, grains, transport conveyances for dry cargo, food, medicine.

Growth pace of consumer prices fell and made up 1.3% in October as compared September. However, prices of foodstuff rose 1.6%, non-food products 1.6%, and tariffs and services 0.2%.

In September prices rose 1.3%. Prices of meat products rose 0.3%, diary, eggs and cheese 2%, bread 0.7%, fish 2.9%, vegetable 8.7%, sugar and confectionary 0.2%, coffee, tea, kakao 0.9%.

In his period prices of oil and fat fell 0.2%, fruits 0.4%, mineral water and cool drinks and juice 1.2%, alcohol drinks 0.8%.

The growth pace of inflation was 7.7% as compared to last year. Prices of food rose 11%, non-food products 5%, while tariffs in the service sector increased 2.4%. Prices of consumers goods and services increased 11.2% as compared to last year and 7.6% - as compared to last December.

As a result of January to October net incomes of the population rose 21.9%, and comprised 8339.2mln manats. The net incomes rose 1.2% as compared to last year.

Major tendency in the fiscal market in the first 10 months of 2006 was the consolidation of manat rates in the respect to US dollar. The IMF forecasts the maintenance of consolidation of the national currency in respect to US dollar reflects real state and is linked with rise in the country's oil revenues.

The National Bank of Azerbaijan (NBA) reiterated the rise in net efficiency rate (RER) in respect of currencies for trade partners in October 2006 as compared to December 2006.

The NBA informed Trend that the rate rose 0.6% in the total goods turnover, 1.5% in export and no change in import. Compared to 2005, the RER rose 1.7% in the total goods turnover, 2.3% in import and 1.2% in export.

According to the NBA, in October the RER in the non-oil sector rose 2.5 % in the total trade compared to the end of 2005, 2.4% in import, and 2.3% in export. Rate of manat rose 3.7%, 3.7% and 2.9% respectively over the similar period of 2005.

In October 2006 the RER of manat in the foreign trade dropped 8.3% compared to December 2000 (without consideration of oil sector), 0.4% 0 in import and 14.4% export. In the non oil sector the RER manat rose 5.5%, 4.3% and 12.8% respectively.

According to the National Bank of Azerbaijan (NBA), with consideration of the oil sector, the total efficiency ratio (RER) of manat in respect to currencies of foreign trade partners of the Country, rose 4.2% in the general trading, 4.1% in import and 4.4% in export. Over 10 months the change of net currency rate affected the RER of goods turnover by 14%, with change of prices, 86% (with consideration of the oil sector).

Research showed that the impact of the U.S. share on increase of RER in foreign trade (with the consideration of the oil sector) was 0.4%, Turkey was 1%, Georgia was 0.1%, Israel was 0.2%, Ukraine was 0.3%, Japan was 0.2%, Iran was 0.04%, Eurozone was 2.06%, UK was 0.18%, Kazakhstan was 0.1%, with a drop in Russia's share of 0.3%.

In October the RER rose 8.1% in overall trading compared to 2005, 7.5% for import and 8.7% for export. In October the RER rose 5.2%, 5.4% and 2.7% in the oil sector respectively compared to December 2005 and 9.1%, 9.4% and 5% compared to 2005.

In October the RER drop in the non-oil sector was 5.9% in the total goods turnover compared to December 2000 (excluding the oil sector), 4.5% in import and 22.7% in export. With the consideration of oil sector the RER also fell 10.9%, 11.8% and 9.6% respectively.

Over January to October 2006, Japan exceeded the growth rate of the manat in respect of currencies of the United States, Georgia, Kazakhstan and Japan. At the same time the manat fell in respect of the Euro, British Pounds and Israeli Shekeli, but rose in reality. During this period the manat has become stronger in respect of the ruble in total by 2.1%, as the growth rate of inflation in both countries were the same during this period. Prevalence of the net rate over the total in respect to currencies of Iran, Turkey and Ukraine is explained with the rise of inflation in these countries over the consumer prices in Azerbaijan.

The NBA came to the conclusion that in the long-term (2000-2006) the RER of manat dropped, which asserts the availability of terms for foreign trade with major trade partners in Azerbaijan. Over 2001-2006 the level of inflation in Azerbaijan was 35.7%, whereas prices of trade partners were 39.2% in average.