Tag Archives: economy

Azerbaijan to switch to fully floating currency in 2017

DEC. 12 2016 (The Conway Bulletin) — Azerbaijan plans to switch to a fully floating currency next year, the Central Bank said, signalling more turbulence for the manat.

The Central Bank has relaxed the manat’s peg to the US dollar twice in the past couple of years, allowing it, in effect to lose half its value. It has also been managing a fall of around 19.5% since June to trade at 1.79/$.

Media quoted the head of the Central Bank, Elman Rustamov, as saying that macro-stability meant that the time was now right to move to a fully floating currency.

Many Azerbaijanis would disagree, though.

As The Conway Bulletin has reported previously, many ordinary Azerbaijanis have lost confidence in the manat and have been trying to withdraw their savings and convert them into US dollars. Many banks in Baku have run out of US dollars.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Uzbekistan adopts budget deficit

DEC. 13 2016 (The Conway Bulletin) — Uzbekistan’s Senate adopted a government budget for 2017 with a deficit of around 1%, media reported. This is the second consecutive year that Uzbekistan has said that it will run a budget deficit and points to a new, and entirely relative, openness. Uzbekistan, like its neighbours, is having to deal with a sharp economic downturn. Uzbek economic data is notoriously unreliable.

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(News report from Issue No. 309, published on Dec. 16 2016)

Armenian economy shrinks

NOV. 30 2016 (The Conway Bulletin) — Armenia’s economy shrunk by 2.6% in the third quarter of the year, the country’s statistics agency said, confirming the poor economic sentiment in the country. In the third quarter of 2015 Armenia’s economy had grown by over 3%. Armenia is reliant on Russia which is suffering from a harsh economic downturn, linked to a fall in oil prices that has tipped it into recession.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Georgia to protect mortgage holders as lari tumbles

TBILISI, NOV. 29 2016 (The Conway Bulletin) — Georgia’s government said it would protect home-owners who took out mortgages in US dollars and also that it would ban online consumer lending, reforms aimed at shoring up confidence in the government and its economic policies after the lari dropped to all time lows.

PM Giorgi Margvelashvili made the announcements after fresh economic data showed a drop in exports and lower-than-expected remittance flows from Russia had pushed the lari down to 2.56 against the US dollar by close-Dec. 1. This is 20% lower than it was valued at in June.

“According to our plan, loans which had been disbursed to individuals before Jan. 1 2015, and supported by real estate, would be recalculated in lari at a rate which is lower than the current by 20 points,” media reported him as saying.

“For example, if the rate today is 2.5 lari per dollar, the credit will be calculated at a rate of 2.3 lari per dollar.”

And Mr Margvelashvili also said that the government would ban credit agencies which lend money via the internet and also look to increase excise duty on cigarettes.

The changes are among the most radical presented by a government in the South Caucasus/Central Asia region since an economic downturn linked to a collapse in oil prices and a recession in Russia. Earlier this year, Kazakhstan announced similar measures to protect mortgage holders who had borrowed in US dollars.

Following Mr Margvelashvili’s intervention, the Georgian Central Bank also called for calm. It said that the sudden fall in the value of the lari was a short term adjustment that would steady.

“We expect that devaluation will stop shortly,” it said in a statement. “We would recommend society and economic agents not to make harsh decisions, which will negatively affect themselves.”

The Central Bank blamed the drop on the strengthening US dollar, the weak rouble and poor Georgian economic data.

Georgia’s GDP grew in the 12- months to the end of October by 1.3%, less than half the rate for the same period in 2015. Remittances from Russia, so vital to the economy, have been low.

And people are worried. David, a Tbilisi resident in his late 20s, said that he had a mortgage for $15,000 which he had taken out when the lari was valued at 2.19 against the US dollar. He said that the fall in the value of the currency had meant it was now virtually unpayable.

“I got this credit for my home, so if the dollar continues to rise, I will have to sell my home and give the credit back,” he said. “I don’t know what else I can do.”

Tamta, a Tbilisi resident, was also worried. “I am trying not to think about this otherwise I’ll go crazy,” she said. “Thank God nobody in my family has a mortgage in dollars.”

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Azerbaijani Central Bank defends economy policy

DEC. 1 2016 (The Conway Bulletin) — Azerbaijan’s manat currency dropped to its lowest ever level against the US dollar, continuing a decline that has wiped 18% off its value since June.

The collapse in the value of the manat, linked to still-subdued oil prices and weaknesses in the Russian economy, is stoking inflation. The lack of confidence in the manat has also triggered a run on US dollars, with many high street banks and exchange offices running out of the greenback.

On Nov. 30, the Azerbaijani Central Bank was forced to defend its policies.

Elman Rustamov, the Central Bank chief, told parliament that he was pursuing a tight monetary policy but he also admitted that the banking system was under strain.

“There are similarities between stabilisation and development,” he said. “If we don’t achieve macroeconomic stability, no investor will have confidence in us.”

International economists expect Azerbaijan’s economy to shrink by around 3% this year, underscoring the problems it is facing. In September, in an effort to prop up its manat currency, the Central Bank raised interest rates to 15% from 9.5%.

But on the streets of Baku, the mood is glum. A Bloomberg reporter said that only one of the nine banks he visited on Nov. 28 sold US dollars. Importantly too, he reported that the Black Market exchange rate for buying US dollars with manat was 5% higher than the official rate, an indication of the lack of confidence in the currency.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Uzbekistan’s acting-president signals changes to currency controls

NOV. 29 2016 (The Conway Bulletin) — Uzbekistan’s acting-president Shavkat Mirziyoyev published a draft decree on the presidential website laying out what appeared to be a manifesto to liberalise some of the tightest currency controls in the world.

In the draft decree, Mr Mirziyoyev wrote that restrictions would be lifted on foreign companies working in Uzbekistan and on Uzbeks taking money out of the country.

The document said that the main aims of the reforms were to “stimulate growth of the country’s export potential, improve the competitive- ness of domestic producers in foreign and domestic markets” and to “create equal conditions for all participants of foreign economic activity during their foreign exchange operations and the prohibition of the practice of privileges and preferences to individual companies or sectors”.

Specifically, the document said Uzbeks would be allowed to take up to $10,000 out of the country. Currently, Uzbeks are banned from taking cash out of the country. Foreign companies working in Uzbekistan have also complained about restrictions on repatriating profits. Under the draft regulations this should be easier.

Uzbekistan also operates a dual exchange rate with the official and the Black Market rate varying widely.

The draft legislation on the presidential website didn’t specifically tackle the issue of the dual exchange rates but loosening currency controls should bring them together.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Azerbaijan’s GDP shrinks in Jan-Oct

NOV. 30 2016 (The Conway Bulletin) — Azerbaijan’s finance minister Samir Sharifov admitted in a parliamentary session that the country’s overall GDP had dropped by 3.7% between Jan. and Oct. this year. He also said, and this is important as Azerbaijan has said it wants to diversify away from oil and gas production, that the non-oil part of the economy had shrunk by over 6%. Azerbaijan has been badly hit by the fall in oil prices and a recession in Russia.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Stock market: Georgian lari and Azerbaijani manat

DEC. 2 2016 (The Conway Bulletin) — Currencies in the South Caucasus have declined sharply over the past few weeks after a slew of poor economic data and a strengthening US dollar.

The Georgian lari hit an all-time low on Tuesday, when it traded at 2.53/$1. A year ago it traded at 1.84/$1. In the past two months, it has fallen by 8%.

The government in Tbilisi said the slide was due to a negative trade balance and the strengthening US dollar. In what could have been a spiral effect, demand for US dollars within Georgia soared, as people feared a sharper depreciation of the national currency.

Macroeconomic statistics have shown that Georgia’s GDP growth has slowed in the past months, disappointing observers.

The Azerbaijani manat, the world’s worst-performing currency in 2015, has also depreciated against the US dollar, down 6.5% in the last 60 days. It traded at 1.73 on Thursday, down almost 40% compared to last year.

Azerbaijan’s banks also stopped selling US dollars due to shortages.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Economic growth halves in Georgia

NOV. 30 2016 (The Conway Bulletin) — Georgia’s year-on-year growth for the 12 months to the end of October more than halved to 1.3%, the Georgian statistics agency said. Georgia’s exports have fallen and its currency has weakened heavily in a regional economic downturn that has stunted growth and worried governments. For the 12 months to the end of October 2015, Georgia recorded GDP growth of 3%. Georgia, though, is faring better than its South Caucasus neighbours. Both Azerbaijan and Armenia’s economies have shrunk.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Utility prices rise in Azerbaijan

NOV. 28 2016 (The Conway Bulletin) — Azerbaijan’s state tariff committee which sets prices for utilities such as electricity, water and gas said that all fees would rise slightly. They said that overall inflation had pushed up prices across all sectors. The price rises are not expected to be drastic, a 2% rise in electricity prices is expected, but they will still irritate ordinary Azerbaijanis who have been dealing with a general economic slowdown for the past 2- 1/2 years.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)