The devaluation of Azerbaijan’s manat is unlikely to happen, and the exchange rate of the national currency is forecast to strengthen, says the report “Azerbaijani economy: 2022 outlook” by Russia's Analytical Credit Rating Agency (ACRA).
By the end of 2022, the manat will demonstrate stability, and the probability of devaluation is low, according to the report.
“The devaluation of manat and the relevant shock effects of inflation and disposable incomes of households came to naught at the turn of 2017-2018, but the question remains: will the regulator be able to maintain the current flexible monetary regime, with interventions minimizing the exchange rate fluctuations caused by non-fundamental factors?” reads the report.
The Russian agency believes that on the one hand, the improvement in the external situation indicates a decrease in the tension in the balance of payments, which moved to the positive zone in 1Q2017, due to lower payments on primary incomes.
“The basic forecast scenario of ACRA implies a stably positive current account at the level of 5-5.7% of GDP, which is formed due to the prevalence of a positive trade balance over negative primary income and neutral secondary income. To enter the positive zone, the threshold price for Azeri Light should be $45 per barrel,” reads the report.
In general, due to a decrease in inflation expectations, a reduction in the intensity of price increases, and international reserves going up to the level of the country's total imports for 8–9 months (or up to $8.5 billion at the end of 2022), the main expectation is a relatively stable exchange rate of the national currency, with a fluctuations corridor of 1.66–1.73 against the US dollar, with the prospects for strengthening to 1.66 at the end of the forecast period, the report says.
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