Report: Oil prices volatility will adversely affect Azerbaijani economy

Report: Oil prices volatility will adversely affect Azerbaijani economy
Analysts: Surplus money supply increases the demand for foreign currency

Baku. 5 May. REPORT.AZ/ The volatility observed in the global oil market prices prevents increase in the rate of economic growth. 

Analytical group of Report News Agency believes, decline in oil prices by more than 10% during the last 4 working days shows that, stability in oil market has not been restored yet. Therefore, oil-producing countries such as Russia and Kazakhstan, as well as Azerbaijan cannot increase a key factor supporting economic growth - the volume of money supply in circulation.

Notably, the volume of money supply in circulation made 6 534.3 mln AZN as of March 1 and it is by 41.4% less than a historical record level of July 2014 - 11 144,4 mln AZN. Increase in money supply first of all raises import and have a negative impact on balance of payments. Also, the excess demand for foreign currency increases the money supply in the event of a crisis.

The analytical group doesn’t believe the stability of the oil market in the coming years will be restored: “Projected real option is preparation of budget according to the price level of 25 USD/barrel.

It is necessary to calculate average oil price at 25-50 USD/barrel level and build corresponding economy”.

Analysts believe that probability of oil prices at 50 USD/barrel level within a year is very high. However, the decline in oil prices can begin since 2018. Therefore, maintaining a constant current level of money supply in circulation and lower economic growth rate is inevitable.

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