A YEAR OF DEEP REFORMS

The starting points for the national economy in 2017 are rather difficult: plummeting oil prices and the crisis tendencies in the world have led to a decrease in national GDP. On the other hand, the transition to a post-oil period initiated a number of far-reaching reforms in the economy, which, as noted by the President Ilham Aliyev, should enable the country to develop in the future due to the non-oil sector. In particular, speaking at a meeting of the Cabinet of Ministers dedicated to the socio-economic development of Azerbaijan in 2016, the President said that the growth of non-oil industrial production by 5% and agriculture by 2.6% in the crisis year were very high figures. "The work that to be done this year will further strengthen this trend", said President Aliyev.

Currency balance

So, the main challenge for the current year is the preservation of macroeconomic stability and acceptable rates of inflation. Objectively, to achieve this goal will not be easy in view of the reduction of the country's income, public investment, the downturn in the construction sector. The banking and financial sectors have been thoroughly shaken as a whole: the decline of manat, bankruptcy, trust decline ... According to Aliyev, the banking sector had the biggest hit caused by the economy. "This year will also be taken serious steps to clean up, recover, and ensure the transparency of this sector, bringing it in line with international standards. Persons who violate the law will continue to wage a serious fight," said the president.

The experts believe that most likely the number of banks will decrease again but this no longer be done through the withdrawal of their licenses but through consolidation and enlargement of existing market participants. However, the upheavals in the banking market began immediately after the holidays: the chairmen of the Board were replaced at some of them including personnel changes, etc.

Recently, the role of banks in macro-economic life of the country has strengthened - Central Bank of Azerbaijan (CBA) has withdrawn 4 percent margin that was used in determining the exchange rate banks. In fact it is a complete "free floating" manat, and now every bank is free to determine its own course. According to many experts, this measure is even somewhat belated. Yes, some difficulty and its impact on the macroeconomic situation and especially on consumer prices should be. But this measure in the first place will result in the elimination of "black market" currencies as unnecessary.

With regard to inflation, then by the expectations of the international rating agencies and institutions, namely it can be a major problem for the country's economy in the current year. But again, a lot depends on how quickly the manat finds its real price and stabilize.

In particular, the statement of the Central Bank about the main directions of monetary policy for 2017 means that macroeconomic stability is a basic prerequisite for the recovery of economic growth and transition of the national economy on a new model of growth and development.

"Ensuring macroeconomic stability primarily requires effective coordination of monetary and fiscal policy, and the whole balance of the economy, the balance of payments and foreign exchange market, and for comprehensive measures to move to a fully floating exchange rate regime manat. It was this maneuver in mind that we have focused on to ensure macroeconomic and financial stability in 2017 and in the medium term, which is mandated to implement the Financial Stability Board", is said in CBA’s statement. At the same time, as an important part of this maneuver, the central bank will provide necessary support for the implementation of the program of macroeconomic stability. Support for the CBA will be carried out by means of tight monetary policy, bearing anti-inflationary in nature.

With regard to the monetary program of the Council of financial stability, its implementation will allow us to respond to inflation risks. However, clearly, that the state has to "help" the manat to stay afloat will not. However, this year it will receive up to 7.5 billion. Manat transfers from the State Oil Fund (SOFAZ), which will be aimed at ensuring macroeconomic stability and accelerate the process of improvement of the International Bank of Azerbaijan.

Real support

It is clear that action in the currency market cannot give effect without the support of the real sector. As stated at the Cabinet meeting, President Aliyev, serious steps need to be taken this year, related to the development of industrial potential of the country, in particular in the framework of the established industrial parks. "In every city a special industrial sector, industrial park, industrial area should be created. This process has already begun, the local executive authorities, businessmen, of course, with government support, should carry out this work in other cities, "- said President.

In addition, as mentioned above, the main reason for deceleration of the dynamics of non-oil sector was nearly 30 percent drop in production in the construction sector. It also has taken the necessary measures to revive - stimulated by the construction of new housing estates, the continuation of the implementation of such major projects as the transformation of the old Soviet "White City", etc. Of course, the scope of work as compared with the recent past will be narrowed, and it is natural, considering. reduction of capital expenditures in this area of ​​the state. However, in the future, subject to the availability of a favorable investment climate, the rapid repayment of investment and profitability, public investment may be replaced by a private - local or foreign. That is, it is likely that the growth curve construction sector soon again rushed up, that affects and associated industries - building materials sector, will be re-created jobs.

Also, there are attempts to increase production in the development of one of the promising sectors of the non-energy sector, the agriculture. As noted already, the growth in agricultural sector in 2016 was achieved in areas such as cotton, silk, tobacco, etc. "We must be realistic. Today, we cannot and will not be able to export technology, this takes time. We cannot export the machinery at the desired level. We cannot provide even ourselves. We must pay attention to the real sector, which can do something for export. Agriculture, processing industry, of course, have the greatest potential here. We must effectively utilize our land and diversify exports," said President Aliyev.

According to forecasts, the share of agriculture, forestry and fisheries in 2017 will be ₼4 billion, or 6.4% of GDP, which is quite a high figure.

In general, based on the concept of economic and social development of the country, as well as forecast figures developed by the Ministry of Economy for 2017 and the next three years, the real economic growth of GDP will be 1% in 2017, or ₼61.4 billion. During 2018-2020, it is expected to continue this trend of growth and increase real GDP to 2.4% by 2020.

Any crisis can be reversed by choosing the right tactics to overcome it and ensure further development. The government of Azerbaijan, according to published forecasts, is determined to carry out its economic policy.