Azerbaijan's Ministry of Economic Development forecasts inflation for 2008 at the level of up to 13%. However, the inflation has already exceeded the figure by 4.8%. Thus, according to the data of the National Bank of Azerbaijan, in April (annual calculation), the inflation in the country made up 17.8% against 16.5% in March, 15.7% in February, 15.3% in January 2008, 16.7% in 2007, 17% in January, 16.7% in February, 16.6% in March, 16.5% in April of the last year and 8.3% in December 2006.
The key reason on inflation in Azerbaijan is so-called imported inflation resulted from excessive flow of foreign capital into the country and price increase for the imported commodities due to factual linkage of the national currency with the UDS.
The imported inflation became a disseminated appearance together with globalization of the economy - efforts to increase flow of commodities, investments, credits, information. In I quarter of 2008 Azerbaijan took the second place amongst the CIS countries for the level of inflation, making up 8% after Ukraine where the prices increased by 9.7%.
In all countries, excluding Azerbaijan and Kazakhstan, the inflation for the three months of 2008 was higher than the indicators of 2007. High inflation in CIS countries in I quarter of 2008 is explained mainly through significant growth of foodstuff prices. Thus, the prices for foodstuffs in Ukraine in I quarter of 2008 increased by 14.9%, in Azerbaijan - 11.6%, in Moldova - 7.4%, in Russia - 5.7%.
Prices for non-foodstuffs mainly increased in Kirgizia (4.6%), Azerbaijan (3%), Russia (2%). The tariffs for the paid services increased in I quarter in Belarus by 9.5%, in Russia - 7.5%, in Ukraine - 7.4%, in Kirgizia - 6.4%.
"In certain extent, the inflation may be catalyst for economic growth, but high inflation in Azerbaijan plays a significant role stopping development of economy," said Deputy Director of Economic Studies Center, Vusal Gasimli. According to him, mainly the inflation affects poor layer of population.
According to forecasts of the Chairman of the Union of Free Consumers, Eyyub Huseynov, Azerbaijani consumers should be prepared for that the local market will sustain gallops in the next three years. According to him, the key reason for inflation is the lack of consumer policy and legislation base to protect rights of consumers in Azerbaijan.
The Economic Studies Center independently summarized the results of the inflation in Azerbaijan for January-April 2008 which differ from the official data, and these results are not happy. The changes of the prices were determined in accordance with the cost of 12 kinds of commodities and services included in the list of minimal food basket (MFB) of Azerbaijan's Cabinet of Ministers. The Center stated that the prices for foodstuffs increased by 19.7%.
According to the Chairman of the Center's Board, Gubad Ibadoglu, in April the amount of MFB for 15 years age people totaled AZN 101.7 and for pensioners - AZN 83.9. From 1 January the minimal salaries and pensions in Azerbaijan were increased from AZN 50 to AZN 60. Under such amount, many pensioners and people can not ensure their minimal demands.
According to Ibadoglu, in April average cost of the services in the regions of Azerbaijan increased by 3.22% while the figure in Baku made up 0.43%. Prices for non-foodstuffs in Baku increased by 1.53%, in regions - 2.5% and over the whole country - 1.96%. The change of index of consumer prices seems to be as: in capital the ICP totals 2.92%, in regions - 3.39% and over the country - 3.12.
The Center's report includes changes of prices for separate groups of commodities. The prices increased mainly for bread and bakery products. The prices on Baku increased by 14.73% and in the regions - 17.04 and generally over the country - 16.01%. The costs of meat and poultry products increased by 5.8%, in regions - 2.6%.
In April the prices for construction materials increased by 3.21% in Baku, 4.94 in regions and 3.97 in the country.
The Government of Azerbaijan intends to strengthen economic and anti-inflation measures in 2008 to prevent the price increase. On 15 May, the price of AZERI LT CIF Augusta was $126.09 per barrel, $2.03 per barrel up from the previous price. AZERI LT FOB Ceyhan oil price was $123.61 per barrel or $1.99 per barrel more than the previous price.
Price rise for oil brings not only negative, but also positive consequences for the economy of the country. According to Gubad Ibadoglu, the positive side is that it will lead to growth of Public budget, but the expenses also increase. Unfortunately the difference between revenues and expenses is small, and even sometimes, the expenses exceed profits. It is trailed with appearance of undesirable tendencies in Azerbaijan economy. Firstly the one-sided increase of State investment expenses draw to 1.4%-1.5% decrease of GDP. In addition, this increase of expenses bring to price rise for the materials and workforce, and it causes reduction of efficiency of Public funds. On the other hand, price increase process is recorded in the world food, crude and currency markets.
The Economic Studies Center suggests the Government to re-consider the amount of the minimal salaries and pensions, bringing them into conformity with elementary needs of population. It needs to remove excessive barriers for targeted social aid received by the poor people of Azerbaijan. Vusal Gasimli devised a pack of suggestions comprising 21 items.