Executive Director of the Center for Analysis of Economic Reforms and Communication Vusal Gasimli gave an interview on the impact of the processes happening in the world to Azerbaijan. According to his words, although the recovery process is accelerating in the world, debt problems, fluctuations in financial markets, and inflation are still among concerns. He said, “The surveys of the Bank of America demonstrates that considering 37 percent of threats in markets due to the acceleration of inflation and 33 percent of threats that emerged after FED had tightened monetary policy, investors see certain hysteria in markets. In May 2021, FAO Food Price Index was 39.7 percent higher than last year. Prices for plant oil, grain, sugar, meat, and milk, which make up the basket of food commodities, are also rising in world markets. Moreover, energy prices continue to grow. Due to the predominance of energy and food products in Azerbaijan's exports, rising prices for these products increase export revenues. For example, during the first four months of this year, Azerbaijan's exports decreased by 8.3 percent in comparable prices but increased by 25.1 percent in actual prices. It means that despite the decrease in the physical volume of exports, the value of export products increased due to rising prices. Similarly, non-oil exports decreased by 10.7 percent in comparable prices but increased by 27 percent in actual prices. Interestingly, the prices of products imported by Azerbaijan have also grown. For example, in the first four months of this year, we imported 18.9 percent less, but if taken in actual prices, imports increased by 4.3 percent.

The calculations demonstrate that exported products in Azerbaijan have become more expensive than imported products, which has a positive effect on the current operations account. It also means an increase in the real effective exchange rate of the manat”. V.Gasimli mentioned that the annual cost of Azerbaijan's imports is about 10 billion US dollars, and that is why the country pays more attention to inflation in world markets. “According to the Central Bank, against the background of non-monetary external and internal expenditure factors, as well as the intensification of deferred demand, actual inflation increased and, by reaching 4.9 percent in May, came to the target corridor. Due to the current account operations surplus in Azerbaijan that in the first quarter of this year amounted to 5.6 percent of GDP, double-digit growth in the non-oil exports, oil prices exceeding 70 US dollars, and the increases in gas exports, the currency demand in the local market are met adequately.  At the same time, in the first five months of this year, the state budget surplus reached 368.9 million manats or 4 percent of budget expenditures. Thus, a simultaneous surplus in current operations account and state budget by maintaining the exchange rate of the manat, also curbs inflation. Because of the low level of foreign debt of the public and private sectors, as well as the banking sector in Azerbaijan, there is no pressure on the manat. The 7.7 percent increase in household deposits and the growth of non-cash turnover in the first four months can also be considered as arguments for the exchange rate of the manat and price stability. For now, fragile recovery in economic growth is far from creating inflationary pressures”.

According to V.Gasimli opinion, the fact that oil prices have reached the highest level in the last two years and risen beyond 70 dollars,  increases Azerbaijan’s revenues. He said, “In the medium term, fiscal policy and the fiscal framework have been shaped in line with new global challenges and economic realities. Thus, when calculating the consolidated and state budget revenues for the medium term, the price of a barrel of oil was taken equal to 40 US dollars. The current price is almost twice higher than forecast, which increases the revenues of the state budget, SOFAZ, and SOCAR. As the recovery of the world economy accelerates, the demand for energy carriers is growing. It has a positive impact on the price of oil, which is the main export product.”

V.Gasimli stated that the Buffet ratio, which expresses capitalization of world companies to GDP ratio, has reached the highest point and thus demonstrated the presence of financial “bubbles”. “The rise in the CAPE index, which measures the ratio of stock prices to profits, also indicates an increase in market tensions. Besides, it is also worrying that the difference between Black Swan Index and Fear Index (FIC) is at an all-time high. The Black Swan Index, which shown potential risk in the markets, has reached the highest point, and the “fear index” (VIX), indicating volatility, has gone down. In this situation, Azerbaijani investors must also optimize their portfolios in compliance with the situation in world financial markets.”

V.Gasimli noted that the recovery of the world economy as a whole has a positive impact on the Azerbaijani economy, which is considered its integrated part. “The univocal answer to the question "Who is the chief digital officer (CDO) for the economy now?" would be "Coronavirus". The COVID-19 pandemic has accelerated the digital transformation. The best way to predict the future is to create it. We can note several trends for the world economy. The world economy is shifting from a product and industry-based approach to a customer-based or human-based approach. The fact that the state role will not return to pre-crisis levels and will become even stronger is one of the “norms”. The forecasts predict the convergence of the virtual and real world, the digitalization of services, and a profound transformation, especially in education and health. As the most important component of technology, human capital will play the role of the main driver. The state and businesses are moving to a culture of innovation. The essence of the culture of innovation is to expect innovative proposals from everyone in the team and learn from mistakes and move forward. Techno-communism is a philosophical-futurological concept that envisages the transition to an egalitarian society, and it is accepted that the scientific and technological achievements used by people belong to the society as a whole. By taking into account the trends that define post-modern architecture, Azerbaijan can ensure economic development based on national priorities set by President Ilham Aliyev.”