No high inflation risk - expert

Baku / 27.06.19 / Turan: The last steps of the government to increase wages do not bear the risks of inflation and devaluation of the manat. This opinion was expressed by the expert economist Rovshan Agayev in an interview with Voice of America, commenting on the 40% increase in the minimum wage and salaries of public sector employees.

In his view, inflation occurs when wages and pensions are sent to meet consumer needs.

This year, the government predicts inflation at 2%. Let it be even more, but in 2019 there is no risk of double-digit inflation in Azerbaijan, he said.

In general, Agaev called the government's measures on social protection of the population correct.

Until now, allocations for salaries and pensions have never exceeded 30% of budget expenditures. But in the current situation, this figure will exceed 40%.

Even with oil prices falling to $ 30 per barrel, the government did not encounter difficulties in meeting budget commitments.

The expert believes that in 2020 the government should maintain the level of social spending at least in the amount of 2019.

Until now, the government has preferred to budget for a high level of investment spending. For investment costs can be maneuvered.

For example, in 2015-2016. due to the fall in oil revenues, the government has twice reduced investment spending.

But social expenses are such that it is impossible to maneuver with them.

Now the government is raising social spending creates a certain bar, below which it can not fall.

As for the fluctuations of the manat, then, the expert is not inclined to believe that the increase in salaries will increase the burden on the national currency, causing demand for the dollar.

In conditions of rather high oil prices, in the foreign exchange market, supply significantly exceeds demand. At least, in the next 6 months, the depreciation of the manat is not expected.

The risk of devaluation of manat can appear only if the price of oil falls to $ 50 or lower, Agayev said. -05B06-