Baku/18.12.17/Turan: An International Monetary Fund (IMF) team led by Mohammed El Qorchi visited Baku from November 30 to December 14 to hold discussions in the context of the 2018 Article IV Consultation.
At the conclusion of the visit, Mr. El Qorchi made the following statement:
"The economy has stabilized in 2017 thanks to active macroeconomic policies and stronger oil prices. The nonhydrocarbon economy started to expand mainly due to reviving service and agriculture sectors. Higher oil prices, better nonhydrocarbon exports, and import compression have also restored the current account surplus. Annual headline inflation, however, has remained elevated mainly due to the impact of exchange rate pass-through effects and one-off increases in administrative prices. For 2017, the mission now projects real GDP to contract by 0.3 percent, and inflation to average 13 percent."
"Growth prospects are positive in the near term. With expanding public investment and social spending, the nonhydrocarbon sector is expected to increase by 4 percent in 2018. The hydrocarbon sector, on the other hand, will continue to contract. Overall, growth is projected at 2 percent in 2018, and should range between 3.5 to 4 percent in the medium term as new natural gas fields come online. As base year effects wear off, inflation should decline to 7 percent in 2018, and gradually recede. Although the restructuring of the banking sector is not complete, risks to the outlook are broadly neutral."
"When the oil price shocks materialized, the authorities appropriately tightened macroeconomic policies, allowed exchange rate flexibility, and started to address banking system fragilities. With the recession now petering out and oil prices rising, there may be pressure to return to a fixed exchange rate regime and to unsustainably high public investment. This must be resisted. While oil prices have rebounded from the lows of early 2016, they are not expected to return to the lofty levels seen in 2011-14." -71D-
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