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Low Oil Prices, Capital Outflows Lead to Formation of Payment Balance Deficit in Azerbaijan

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The Central Bank of Azerbaijan announced the balance of payments for the first quarter of 2020.

After a three-year hiatus, the country’s balance of payments became negative again.

Although there was a positive balance of $ 646.3 million in current accounts, there was a deficit in financial accounts. At the same time, the outflow of currency of unknown origin from the country under the heading “net errors and defects” amounted to $ 596 million. As a result, this led to a balance of payments deficit of about $ 1.4 billion.

Please note that this happened at a time when the average export oil price was relatively favorable – over $ 57.6 per barrel versus $ 61.9 d January-March 2019.

In the second quarter, the average export price of Azerbaijani oil is projected at about $ 34-35 per barrel. Based on this fact, it is possible to predict an increase in the negative balance of payments.

The long-term and constantly negative balance of payments represents a serious threat to macroeconomic stability in the country.

According to the balance of payments published on the website of the Central Bank, in January-March 2020, the volume of foreign trade turnover amounted to $ 7.1 billion and Azerbaijan had a surplus of $ 1.9 billion in foreign trade (a decrease of 24.7%).

In the structure of exports, which amounted to $ 4.5 billion (a decline of 6%), oil and gas exports amounted to $ 4.1 billion (a decline of 6.9%). At the same time, direct export of oil and oil products amounted to $ 3.3 billion, including oil export of $ 3.2 billion.

In the structure of imports, which amounted to $ 2.6 billion (an increase of 14.6%), consumer goods accounted for $ 1.1 billion (including $ 352 million – food products). Import of equipment and special goods to Azerbaijan in January-March 2020 amounted to $ 184.4 million or 7.1% of total impo.

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