BAKU – The World Bank has forecast a slowdown of average annual inflation in Azerbaijan to 5% in 2017 due to limited liquidity on the market, a revised World Bank report, Azerbaijan Partnership Program Snapshot said.
Average annual inflation was 12.6% in Azerbaijan for 2016.
The World Bank expects Azerbaijan’s economy to experience another year of negative growth in 2017 despite the anticipated recovery of oil prices. “This is because oil production is not expected to increase and the non-oil sector continues to be affected by the government’s spending cuts and the banking sector distress. Non-oil sector growth will remain weak, as the government is set to keep a tight stance on both fiscal and monetary policies to safeguard macroeconomic stability. Meanwhile, there will be a notable improvement in the consolidated fiscal position over 2017-19 as a result of envisioned spending consolidation,” the report said.
The World Bank does not think that current conditions are conducive to significant poverty reduction. “Although recent efforts to step up social spending should help alleviate poverty, constrained private sector growth could have a negative impact on the poor. Risks to growth and poverty reduction remain high,” the World Bank said.
World Bank analysts said that the Azerbaijani government faces two challenges: minimizing the impact of the planned fiscal consolidation on growth and safeguarding spending to protect the poor as well as restoring public and investor confidence, “which requires bold reforms that accelerate banking sector resolution and improve the business environment.”
The Azerbaijani government forecasts annual average inflation of 7.3% for 2017.
