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

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.