Hyperinflation threatens Azerbaijan

Hyperinflation threatens Azerbaijan

After the second devaluation of the manat last year and the events that followed: inflation, emergence of the almost forgotten word – deficit, which applies to medicines, foods, cigarettes and alcohol, the population of Azerbaijan is very anxious. In fact, what could be the highest inflation rate in Azerbaijan this year? Could it reach the terrifying numbers, such as 43% in Ukraine in the last year? As it turns out, if the dollar continues rapid growth, then Azerbaijan cannot avoid hyperinflation.

In an interview to Azeri Daily Director of the Centre for Economic and Social Development (CESD) of Azerbaijan, doctor of economic sciences Vuqar Bayramov said that an accurate prediction as to what will be Inflation in 2016 no one can give, for everything depends on the fact which will be the final rate of the manat against the US dollar.

‘However, given the current economic realities of Azerbaijan, it is already possible to say that inflation will be double-digit, and this fact, alas, is undeniable. According to our research, if there is a third devaluation, given the higher prices for imported and local products, in 2016 inflation in Azerbaijan will be 14%.

This will be the maximum level of inflation in recent years in Azerbaijan. It exceeds the rate of inflation in 2015 by 3.5 times. In 2015, according to official statistics the rate of inflation in Azerbaijan was fixed at 3.8%, but according to our monitoring this figure is understated, and the real rate of inflation for the year was 9%.’

Can the economy of Azerbaijan share the fate of Ukraine, where inflation in 2015 rose to 43.3% and reached a maximum value over the past 20 years? This was reported on the website of the State Service of Statistics of Ukraine. For comparison, at the end of 2014, inflation in the country amounted to 24.9%.

According to Bayramov, indeed, many in the country fear that the Azerbaijani manat awaits the fate of the Ukrainian hryvnia, and the rate of inflation in Azerbaijan will also come close to Ukrainian indicators of inflation exceeding 40%. ‘Unfortunately, no one can say that this is impossible. All again rests on the rate of the manat against the US dollar. If the dollar will continue rapid growth, hyperinflation cannot be avoided in Azerbaijan,’ summed up the economist.

However, simultaneously with the hyperinflation in Ukraine in December, prices fell for some goods. For example, pork and rice became cheaper by 2.1% and 2.0%. Fashion became cheaper by 1.7%, including clothes – by 1.9%, footwear – by 1.5%. Prices dropped for tobacco products.

This means that the laws of the market in Ukraine are still working. And in Azerbaijan, as we know, once raised prices are rarely reduced. And the events that occurred in the currency and consumer markets in the country after December 21, 2015 confirm that.

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