IMF Recommends Structural and Institutional Reforms Able to Reduce Dependence on Commodities

The International Monetary Fund (IMF) published the most recent review of the Regional Economic Outlook: Middle East and Central Asia, which marked the double-digit inflation in Azerbaijan this year.

According to analysts, this applies to all oil-exporting countries, and Azerbaijan actually conducts tight monetary policy against the backdrop of high inflation pressures and slowing economic growth in the countries that are the most important economic partners in the region (referring to Russia and China).

Analysts of IMF predict a recession of 2.4% this year and 4% GDP growth in the years 2018-21, being confident in the acceleration of growth in the non-oil sector, especially in Azerbaijan.

Speaking of financial vulnerabilities, the Fund says growth risks in the banking sector by reducing the rates of national currencies. "Some banks continue to record losses and take into account the risks associated with fluctuations in exchange rates, and remain vulnerable to further declines. Governments take steps to curb the risks: an infusion of capital, restructuring and closure of troubled banks, the revision of lending practices and asset quality assurance procedures, and conduct stress tests, which has resulted in revoked licenses of 9 local banks.

IJMF links the improvement of medium-term prospects, creation of jobs and rise in the living standards with the tightening of macro prudential policy measures and crisis management. The development of non-oil sector needs structural and institutional reforms that could reduce dependence on commodities and remittances. In addition, management practices should be improved, property rights should be respected, and there should be transparent reporting and tighter control.

According to the recent survey, the average annual inflation in Azerbaijan this year will be 10.2% and next year - 8.5%.

Recall that as a result of last year, the official GDP growth was at 1.1% at the average annual inflation rate of 4%.   --17D-