Report: Money supply should be increased to achieve economic growth - ANALYSIS

Relative economic recovery expected in Azerbaijan in the second half of this year

Baku. 19 May. REPORT.AZ/ Money supply in Azerbaijan (M2 monetary unit) can preventeconomic slowdown. Analytical group of Report notes that, in February and March 2016, M2 aggregate increased by 941,3 mln AZN or by 11,8%. But compared to the same period of 2015the volume of money supply is less by 3 550,1 mln AZN or by 28,4%.

Analysts added that without taking into account inflation, the real growth of the money supply in February, almost did not happen:" Inflation in Azerbaijan was 10.8% as of April 1. It also does not allow the acceleration of economic growth. The current economic slowdown is simply prevents the growth of the M2 aggregate."

"The increase in investment in fixed assets in order to achieve economic growth, ie, at least 15% increase in the money supply is important. If there will not be a needed growth of money supply, it will be impossible to get out of the economic recession", the expert said.

"Money supply growth accelerated as a result of a new financial crisis or oil prices could exacerbate the demand for foreign currency in the foreign exchange reserves, which in turn can lead to a decrease in foreign exchange reserves. For this reason, the Central Bank has discretion to increase the M2 aggregate. Development of non-oil sector, diversification of the economy and other factors to increase the flow of currency into the country is the way out of the situation.

The reduction of money supply and acceleration of the process of economic recovery in turn will lead to the increase in the money supply and acceleration of economic recovery."

Notably, the economic slowdown in the January-March amounted to 3.5% compared to the same period last year.

Analytical Group of Report News Agency predicts that there will be stagnation in GDP in the second quarter and if oil prices will remain at current levels and in case of normalization of global economic environment, there will be slight economic growth in the second half of the year. "But at the end of 2016 about 2.5% of the economic slowdown is expected in Azerbaijan."

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