Fitch names factors for decreasing inflation in Azerbaijan in 2023-2024

The inflation rate in Azerbaijan will decrease to an average of 10.3% in 2023 from 13.9% last year, Report informs referring to the international rating agency Fitch Ratings.

Fitch forecasts a decline in inflation to 7.3% for 2024.

“Fitch forecasts inflation falls in Azerbaijan to an average 10.3% in 2023 and 7.3% in 2024 on moderating global commodity prices, easing supply chain disruption and the stronger real effective exchange rate, but still above the CBA target (4% +/-2pp),” reads the report.

“Inflation moderated to 14.1% in February from a peak of 15.6% in October 2022, partly reflecting a 4pp easing of food price inflation to 17.1%. There is a somewhat greater domestic component than early last year, with nominal wages growing close to the headline rate.”

The main policy interest rate was raised only 100bp over the last year to 8.5% and there is relatively weak monetary policy transmission, although other measures have been taken to absorb banking sector liquidity, including through reserve requirements, Fitch noted.