IMF Forecasts

The mission of the International Monetary Fund has completed its work in Baku. As a result, it issued a statement which stressed that due to the fall in world oil prices or the ongoing stress of the banking system due to the devaluation of the manat it is possible there will be a stable or even a sharp drop in the level of the local GDP.

All external buffers ("financial cushion"), including the State Oil Fund, cover the 35-month level of imports and the foreign exchange reserves of the Central Bank of Azerbaijan have stabilized, covering 7 months of imports.

In this, the short-term macroeconomic outlook has worsened. Thus, the growth of non-oil GDP is expected to slow to 3.5% this year. A significant drop in export revenue and slowing public investment will be reflected in the real economy, in particular, in the demand of the private sector weakened with certain loss of public confidence after the devaluation.

Some recovery in oil prices in the next year should help to bring the growth of non-oil GDP to nearly 4.5% in 2016. Inflation this year is likely to reach 8.5% due to lower demand and government inaction on the issue of preventing the growth of prices.

At low oil prices, the surplus of current account of Azerbaijan's balance will be reduced to 5% of GDP, and the budget balance will have a deficit of 6% of GDP, the IMF said in the information.

At the same time, the IMF mission expressed satisfaction with the government's plans to bring the state budget in line with the realities prevailing in the low oil prices. "The provision of execution of the state budget for 2015 at a low level, as well as a plan for drawing it up for 2016 at the rate of $ 50 per barrel of oil will limit excessive use of the state oil fund and reduce the risk of inflationary pressures in the period following the devaluation." This is the conclusion of the IMF mission headed by Raj Almarzogi. -17D-