By Azernews

By Ayya Lmahamad

Annual inflation in Azerbaijan will gradually decrease to a single digit with a favorable change in external factors in 2023, Central Bank Governor Taleh Kazimov said at a news conference, Azernews reports.

“It is expected that seasonal factors will have a restraining effect on inflation in July and August,” he said.

Moreover, Kazimov stated that the bank forecasts average annual inflation of 12.5-12.8 percent in 2022.

“We want to see how the situation worldwide will develop in the coming months as the external factors are ever-changing, including the prices of imported goods. Something changes every month. We see that food prices are declining, seasonally, in the last two months. Logistics costs are also reduced. Of course, we will revise our forecasts if this continues,” he said.

Base rate

He also mentioned that according to the decision of the bank’s management board, the base rate was kept unchanged. He added that the global economy is the main factor that influenced this decision among several internal and external factors.

“Uncertainties associated with the growth of the global economy are high, but an international environment in terms of a balance of payments remains favorable for the Azerbaijani economy,” he said.

Noting that the positive balance of foreign trade increased by 3.5 times in the first half of 2022, Kazimov stated that this is explained by high world prices for the main export commodities and the realization of non-primary export potential.

The bank’s governor also recalled that the average price of Brent Crude Oil was $105.4 per barrel in January-June this year.

“We are observing an increase in remittances to Azerbaijan besides the improving foreign trade indicators. This certainly leads to an increase in a positive balance of payment,” he said.

Strategic foreign exchange reserves

Taleh Kazimov highlighted that the country’s strategic foreign exchange reserves increased by 1.8 percent in the first six months of the year and amounted to $54.2 billion.

He added that the bank purchased foreign currency worth $485 million in January-July 2022.

National rating agency

Furthermore, he noted that Azerbaijan’s Central Bank is considering the possibility of establishing a national rating agency.

“CBA is currently studying international experience in this area,” he said.

Credit risk management strategy

CBA’s Executive Director Togrul Aliyev stated that the bank is considering a strategy for credit risk management.

Stressing that the banking system survived the coronavirus pandemic, he stated that the quality of the loan portfolio is better than expected.

“We do not see a deterioration in the quality of loan portfolio. De-dollarization processes are underway,” he said.

“This is observed both in loan and in deposit portfolios. CBA is aware of issues related to underwriting and credit risks. Response strategy is being worked out,” he said.

He added that in this regard, the bank’s requirements will be updated and presented to the attention of the public and the banking sector.

Russian Mir payment system

Additionally, the bank’s Executive Director Farid Osmanov mentioned that CBA is discussing the possibility of launching the Russian payment system Mir in Azerbaijan.

He noted that the issue is being discussed taking into account political and economic issues with the participation of relevant state structures and within the framework of the intergovernmental Azerbaijani-Russian commission.

“The final decision will be made public after it is made,” he said.