"Report": Uncertainties in global economy hampering rise of Azerbaijani manat

"Report": Uncertainties in global economy hampering rise of Azerbaijani manat
Central Bank can not reduce discount rate too much

Baku. 6 March. REPORT.AZ/ The current and expected uncertainties in global economy hampering the rise of Azerbaijani manat rate.

Analytical Group of Report News Agency informs, geopolitical problems, protectionist decisions, sharp fluctuations in exchange rates, instability in crypto-currency markets, and pressure on oil prices, as well as in a number of developing countries, prevents the rise of the national currency in Azerbaijan.

Developing countries, including Azerbaijan, are very close to the economic downturn in the medium-term perspective. Most of these countries have been forced to reduce their cash supply to protect domestic currency from depreciation.This, in turn, impedes an economic growth. Otherwise, if central banks increase their money supply, then two factors will have a negative impact on the national currency. The first is the increase in imports, and secondly, the increase in demand for foreign currency when the global financial crisis is taking place. Situation is the same in Azerbaijan. Dollarization remains high. Central Bank can not reduce discount rate too much. Because the decrease in rates minimizes the attractiveness of deposits in manats in contrast to foreign currencies. The growth of the economy is mainly due to the increase in public spending.

Naturally, public spending can not be increased in the right level. This leads to an increase in the money supply. That's why the costs are softly increased, and at best 0-2% economic growth is being achieved. For these reasons, despite the rise in oil prices, the strengthening of the manat is facing pressure. In the coming years, the exchange rate of manat will remain at the current level in best case and if oil becomes cheaper, then accordingly decline of manat may take place.

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