General economic situation

In January to October 2006 the GDP grew 34.4% and made up 16,329,4mln AZN at current prices. The growth pace turned out 9.2% 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 37.5% and comprised 13,137,1mln manats. Last year the figure was 32.6%.

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 44.1% and comprised 75% of the total industrial output. Rise in industrial production was observed in oil production by 46.3% and it comprised 29,213mln tons, whereas gas production was 6,097bln cu m amid 18.1%-rise.

Moreover, rise in industrial production was observed in the non-oil sector (7.5%), including the chemical industry (rise by 9.1%), metallurgical industry (9.1%), food production (4.1%), electric appliances and optic goods (21.9%), machinery and devices (44.6%), etc.

The growth of production in the agrarian sector dropped 1.5% in 2006 against 7.1% in 2005.

The investments put in major capital rose inconsiderably. A total of 5219.5m AZN was invested in economy, which is 15.2% up as compared to 2005 when it was 11.9%. The major reason for rise in investments is growth in demand by the construction of industrial facilities in this sector, where 4480.6mln, or 86.2% of all investments was spent.

Thus, growth pace of consumer demand continue stable rising. The turnover of retail good turnover rose 12.8%, while the community services grew 41.3%. The growth pace of commercial services increased, while in the retail goods turnover fell, as it seems on the results of the first 11 months of 2005, when the rise comprised 12.9% and 24.4% respectively

Sources: State Statistics Committee, calculations by Trend

Major part of demand was satisfied at the expense of export, which grew by 35.9% and comprised $5624,972mln. The volume of import made up $4623,482mln, or 21.47% up as compared to last year. The foreign trade ended in balance with $1001,489mln in black.

Major reason for rise in import operations was increase in the amount of import of transport conveyances and spare parts for them, oil gas and hydrocarbons, food products, machines and electric appliances, electro-technical equipment and spare parts.

In November 2006, the growth rate of prices on consumer goods and tariffs on services went up by 1.3% versus October 2006. According to the State Statistics Committee, in this period, the price on food products increased by 2.1%, non-food products вЂ" 0.8%, whereas tariffs on services remained in the previous level.

The State Committee fixed in November 2006 that prices on meat increased by 0,2%, dairy, cheese, and eggs вЂ" by 1%, bakery вЂ" 2,1%, fish products вЂ" 2,5%, vegetables вЂ" 6,5%, fruits вЂ" 8.6%, sugar and confectionery вЂ" 0,2%, oils and fats - 0,5%, mineral water, juices, and cool drinks - 1,3%.

In this period, the prices on the following goods fell down coffee, tea, cacao вЂ" 0.1%.: tobacco вЂ" 0.3% alcohol drinks вЂ" 1.4%, beer вЂ" 0.5%.

Over the past ten months of 2006, the inflation ratio reached 8% as compared to last year. At the same time, price on food increased by 11.5%, non-food вЂ" 5.1%, tariffs on services вЂ" 2.5%. In November 2006, prices on consumer goods and tariffs increased by 11.5% versus the corresponding period of the last year and 9% - as compared to December 2006.

As a result of January to November net incomes of the population rose 22.5%, and comprised 9223.2mln manats. The net incomes rose 3.52% as compared to last year.

The National Bank of Azerbaijan (NBA) announced that in November 2006 the basic inflation rose by 8.3% as compared to 2005.

In November rise of the Consumer Price Index was 0.7% as compared to August, while in the beginning of 2006 вЂ" 7.5%. The calculations were made in line with the first methodology, which removes all fluctuations of administrative regulation of prices (prices of energy resources) and prices of seasonal character (fruits and vegetables).

In accordance with the second methodology of calculation, which uses average principle of smoothing, the basic inflation made up 5.5% in November 2006 as compared to 2005. As compared to the beginning of the year the rise was 5%, while as compared to November вЂ" 0.7%. During the calculation the NBA cleans the basket by 16%, from the goods and services that have administrative and seasonal prices.

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

The NBA informed Trend that the rate fell 0.4% in the total goods turnover, 1.3% in export, but increased 0.7% in import. Compared to 2005, the RER dropped 0.5% in the total goods turnover, 1.5% in export, but increased 0.6% in import.

According to the NBA, in November the RER in the non-oil sector rose 1.6 % in the total trade compared to the end of 2005, 1.6% in export, and 1.5% in import. Rate of manat rose 1.6%, 1.5% and 1.7% respectively over the similar period of 2005.

In November 2006 the RER of manat in the foreign trade dropped 9.2% compared to December 2000 (without consideration of oil sector), 1.1% 0 in import and 15.4% export. In the non oil sector the RER manat rose 4.7%, 3.4% and 12.3% 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% in the general trading, 4% in import and 4.1% in export. Over 11 months the change of net currency rate affected the RER of goods turnover by 8.3%, with change of prices, 91.7% (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 November the RER rose 5.1% in overall trading compared to 2005, 5.3% for import and 2.4% for export. In November the RER rose 6.9%, 7.2% and 3.9% compared to 2005.

In November the RER drop in the non-oil sector was 5.5% in the total goods turnover compared to December 2000 (excluding the oil sector), 4% in import and 22.8% in export. With the consideration of oil sector the RER also fell 10.7%, 11.8% and 9.8% respectively.

Over January to November 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, 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.