General economic situation

In January to May 2007 the GDP grew 36.2% and made up 8.763.2mln AZN at current prices. The growth pace turned out 1.8% less than 2006.

Major factor causing drop in the economic growth was the sharp fall in industry. In January to May the industrial production and services of industrial character rose 36.1% and comprised AZN 7.667.1mln. Last year the figure was 43.8%.

The drop is explained with 2.8%-cut in production in the state sector, which is linked with the cessation of manufacturing at chemical enterprises due to rise in prices of energy resources (drop in production was by 55.3%). It was linked with the cut in chemical output and electricity, gas and water production (by 2%). Special weight of production in the public sector and services comprised only 22.4%.

Meanwhile, the output of oil production and oil refinery plants exceeded the volume fixed January to May 2007 by 43.6%. The oil production rose 46.2% and made up 17.5mln tons, while gas production - 3.640.9mln cu m with a rise by 27.7%.

Moreover, rise was observed in the production of plastic and rubber wares by 98.3%, machine and equipment by 77.5%, transport means by 67% production of electric, optic and electric equipment by 14.5%, production of wood and wooden wares by 46.1%, foodstuff by 12.2%, non-metallic mineral substances 66.5%.

In January to May 2007 growth rate in agrarian industry rose as compared to last year. So, the output increased by 7.1% against 2.2% in 2006.

Over the first five months of 2007 the growth pace in the rose as compared to 2006. In this period the volume of production increased by 7.9% as compared to 1.8% in 2006.

The investments put in major capital rose inconsiderably. A total of AZN 2.272.1mln was invested in economy at the expense of all sources, which is 9.9% up as compared to 2006 when it was 8.8%. The major reason for rise in investments is growth in demand by the construction of industrial facilities in this sector, where 1.820.3mln, or 80.1% of all investments was spent.

Thus, growth rate of consumer demand continue stable rising. The turnover of retail good turnover rose 14.3%, while the community services grew 32.8%. The growth rate of commercial services increased, while in the retail goods turnover fell, as it seems on the results of 2006, when the rise comprised 12.2% and 31.9% respectively

Value Added Price In bn manats Special weight, in % Real rise, in %
GDP in total 8763,2 100,0 136,2
production of goods 6284,5 71,8 148,5
including - industry  5532,3  63,2  156,1
- agriculture 208,3 2,4 107,9
- construction 543,9 6,2 104,0
Production of services 1861,8 21,2 110,3
Including: - transport  468,7  5,3  113,2
- communications 137,7 1,6 118,1
- trade and repair 544,1 6,2 114,1
- hotels and restaurants 59,3 0,7 125,5
- social and different services 652,0 7,4 103,1
Net taxes on products 616,9 7,0 107,7
Defliator 100,6  

Sources: State Statistics Committee, calculations by Trend

Major part of demand was satisfied at the expense of import, which grew by 20.24% and comprised $2.005.866mln. The volume of import made up $1.862.133mln, or 24.69% less as compared to last year. The foreign trade ended in balance with $143,733mln in red.

Major reason for rise in import operations was increase in the amount of import of transport conveyances and spare parts for them, furniture, pharmceurics, food products, ferrous metal and ware of it, machines and electric appliances, electro-technical equipment and spare parts

In January to May 2007, the growth rate of prices on consumer goods and tariffs on services went up by 15.3%. According to the State Statistics Committee, in this period the price on food products increased by 14.5%, non-food products - 10.4%, whereas tariffs on services rose 23.1%.

The State Committee fixed in May 2007 that prices of bakery rose 0.1%, fruits - 2.8%, mineral water, juices, and cool drinks - 0.4%, tea and coffee - 0.4%, beer - 1.4%, alcohol drinks. However, prices of dairy, cheese, and eggs dropped 2.5%, vegetables - 5.4%, fish by 0.3%, meat - 0.1%, oil and fats - 0.6%.

As a result of January to April net incomes of the population rose 36.9%, and comprised AZN 5.017mln. The net incomes dropped 19.6% as compared to last year.

Major tendency at the fiscal market was the consolidation of manat rates with respect to dollar. A tendency on increase of rates, observed over the past period, reflects the real state and is linked with increase of oil revenues in the country.

In January to May, 2007 consolidation of the national currency of Azerbaijan (manat) compared to the dollar rated 1.4%, the President of the National Bank of Azerbaijan (NBA), Elman Rustamov , has reported. That is nominal consolidation of the manat. However, nominally the effective rate decreased by 1.4%.

"Reduction in the prices of manat comparing the currencies of Azerbaijan's main foreign trade partners is explained by the fact that the rate of consolation of their currencies' exchange rates comparing to the dollar were higher," Rustamov said.

The consolidation of the manat has its fundamental reasons, with majority of them being surplus of payment balance of the country, which is related to the exceeding investments coming into Azerbaijan resulting in an over flow from the country. Relatively, supply of the dollar is higher.

The President of the NBA considers the tendency to be long-term. However, the main purpose of the NBA is to prevent excessive rise in consolidation. Thus, it will be possible to maintain competitiveness in the non-oil sector in Azerbaijan.

Since the beginning of the year the NBA purchased excess amount of dollar ($200mln). One of the sterilization measures is the expansion of the issue of notes and state securities issued since the beginning of the year made up AZN 50mln.

There is AZN 160mln in current circulation.

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