OVERCOMING DIFFICULTIES

Since the beginning of 2015, oil prices on world markets have continued to update the "historic" lows, falling below 50 dollars. Moreover, amid the depressing impact of this trend on the economies of oil-producing states, Saudi Prince Al-Waleed bin Talal made a statement dashing any hopes that the "bad times" for sellers of oil will end soon. According to him, the price of oil will never rise to the level of 100 dollars a barrel, because such a figure as a whole is "wrong".

Naturally, for the economy of Azerbaijan, most of the state revenues of which come from oil exports, its cheapening cannot be absolutely painless. The government will have to reconsider some government spending, as warned by President Ilham Aliyev at the last meeting of the Cabinet of Ministers on the results of 2014 and plans for the current year. At the same time, the forecasts of both local and international experts say that thanks to stable macroeconomic indicators and the accelerated development of the non-oil sector Azerbaijan's economy will continue to grow in all directions this year.

Stable manat - stable economy

Azerbaijan continues to be an "island of stability" in the region, while the impact of low oil prices on the economies of many oil-producing states is more than obvious. Even with the sharp decline in revenues in the last months of 2014, the country's economy increased by 2.8 per cent during the year, while the growth of the non-oil sector accounted for 7 per cent. The level of external debt in GDP was in the range of 9 per cent.

Inflation was very low - 1.4 per cent, while incomes grew by 4.8 per cent. This significant difference indicates an increase in welfare. In addition, it is the lowest inflation over the last 10 years, and it is approximately 5 per cent lower than inflation in countries that are major trading partners, which brings well-known competitive advantages in international trade to the economy of Azerbaijan. 27bn dollars were invested in the country's economy, of which 16bn dollars are domestic. Within the framework of the "Year of Industry" in 2014, more than 230 industrial enterprises were founded in the republic and 123,000 new jobs were created, of which nearly 100,000 are permanent.

At the same time, a very important economic achievement of the past year was the stability of the rate of the manat. As you know, amid falling oil prices the national currencies of the regional countries were the worst hit, which led to serious devaluation. The Russian rouble fell by 80 per cent, Kazakh tenge - 19 per cent, Turkmen manat - 22 per cent, Belarusian rouble - 17 per cent, Ukrainian hryvnia - 90 per cent and the Turkish lira - 8 per cent. Therefore, it is not surprising that recently a number of international agencies recognized the manat as the most stable and reliable currency in the CIS and Eastern Europe, noting its positive outlook.

However, we must say that stability cost dearly to the Central Bank of Azerbaijan (CBA), which sold 1.127bn in foreign currency on the foreign exchange market in December 2014 alone in order to support the national currency. As a result, the net volume of currency acquisition by the Central Bank on the currency market over the past year amounted to 143m dollars. This and fluctuations of the rate on the global market on the whole led to a decline in currency reserves by 2.78 per cent - to 13.758,3bn dollars at the end of 2014. But overall, the strategic currency reserves of the country, which reached 70 per cent of gross domestic product today, increased and exceeded the national debt by 8 times and are ahead of the three-year importation of goods and services. In this indicator, the country continues to maintain its place in the top twenty in the world.

But whatever happens, the CBA has no plans to give up its policy, and its board chairman Elman Rustamov stated that ensuring the stability of the manat this year is one of the main goals. "Ongoing calculations show that the stability of the manat is the main indicator of economic stability. Thus, according to the processes emanating from the relevant international situation, a somewhat restrained fiscal policy will probably be carried out," he said.

By the way, the stability of the manat, in principle, could be another real source of income both for the local banking sector and for the overall budget of the country. For example, according to President Ilham Aliyev, if foreign citizens and companies keep their money in manats, they will not lose. "The money will remain intact and bring them additional income, because right now in the world, many financial institutions are not giving out interest rates on deposits. Deposits are simply kept as an investment," he said.

Stable currency and confidence in the banking sector also affected the growth in the deposits of the population (by 11 per cent), which exceeded 7bn manats. The size of deposits per capita approached about 1,000 dollars, and interest rates on the deposits of the population exceeded 0.5bn manats. "There are up to 4.5m depositors in the country. Today, there are 473 depositors for every thousand people. Our goal is to make sure that every person who has reached the age of majority has one or more bank accounts," Rustamov said.

Difficult but doable task

These are all the achievements of 2014. And in order to save and increase them in 2015, the government will have to work hard... "It's no secret that 2015 will be a very difficult year for the world economy ... The sharp drop in oil prices, of course, will be a test for countries rich in natural resources," President Ilham Aliyev said on that score.

The price of oil set in the state budget for this year is 90 dollars per barrel, while last week it fell below 50 dollars on the global commodity markets...

At the same time, the calculations carried out by the Central Bank by means of stress testing and simulation models show that the Azerbaijani economy, as in the current year and over the medium term, clearly has the capacity and potential for an adequate response to all the risks. "And the main purpose is to realize this potential through well-coordinated cold-blooded work between economic entities," Rustamov said.

First of all, the bet will be placed on the development of the non-oil sector again. After all, even if we suppose that oil prices shoot up again, recent years have seen a decline in its production in Azerbaijan, and this trend will continue. That is to say one way or another, the development of the non-oil sector is an economic necessity.

To do this, President Ilham Aliyev offered to send more bank resources into the real sector of the economy. "Of course, now it is necessary to allocate funds for various industrial loans and other projects. Now shopping centres, offices and residential buildings are under construction in Azerbaijan. And this is natural, as the country's economy develops and people need such projects. However, the current priority for the country's economy are funds invested in the real sector," he said.

In any case, the introduction of the 10-per-cent tax on large amounts of deposits would encourage the owners of major free funds not to keep them as a "dead burden" in banks, but to invest in new production lines and in construction, tourism and other sectors of the economy. After all, today there are sufficient conditions in the country for business development and profitable investments. "Today, the economic crisis continues in the world on the one hand and there is a lack of funds on the other - there is not much choice for investment, because no one wants to invest in countries going through a crisis. Therefore, attracting investment in stable countries - countries where there is political stability, economic development - is much easier," the president said.

However, returning to the effects of the fall in oil prices on the economy, we must admit that Azerbaijan's revenues this year will clearly decrease, which imposes additional responsibility on the government agencies. "Of course, we will not give our consent to projects that are not a priority. At the same time, management principles in every state entity and in state-owned companies should be improved. Waste should not be allowed," the head of state said.

At the same time, he promised that the implementation of all important infrastructure and social projects and programmes will be continued. One of the main directions of development this year will also be the agricultural sector and the maximum increase in domestic food production. Help to farmers in the creation of large farms, preferential receipt of equipment and so on will be strengthened. Therefore, by the order of President Ilham Aliyev, 2015 has been declared Year of Agriculture.

It is a comprehensive focus on the non-oil segment of the economy that will ensure its growth by 4.4 per cent this year, including the non-oil sector - by 8.2 per cent. And the arguments of the government turned out so convincing that the World Bank also agreed with this forecast although it had previously anticipated a growth of only 4.1 per cent.

In short, Ilham Aliyev noted, due to ongoing and future work to diversify the economy, institutional reforms and the use of more effective methods of management, Azerbaijan will overcome this difficult situation with credit.

AT FIRST HAND

"Today, the economic crisis continues in the world on the one hand and there is a lack of funds on the other - there is not much choice for investment, because no one wants to invest in countries going through a crisis. Therefore, attracting investment in stable countries - countries where there is political stability, economic development - is much easier,"

Ilham Aliyev, President of Azerbaijan