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Azerbaijan Weekly Market Watch

Azerbaijan Weekly Market Watch

Galt&Taggart Publishes Report on Main Developments that Took Place in Azerbaijani Economy Last Week:

Azerbaijan economy up 0.8% y/y in 1M17 In 1M17

real GDP increased 0.8% y/y, compared to the 3.3% y/y contraction recorded in 1M16. Non-oil GDP was up 1.5% y/y, compared to the 3.7% y/y decline in 1M16, while oil GDP was down 0.5% y/y. The main drag on growth continued to be the construction sector, down 6.4% y/y in 1M17. Excluding the construction sector, non-oil GDP was up 2.3% y/y in 1M17.

Inflation rate at 11.9% y/y in January 2017

Annual CPI inflation rate retreated from 15.5% in the previous month to 11.9% in January 2017. In January, food prices were up 14.5% y/y (-6.5ppts m/m), non-food prices were up 12.3% y/y (- 4.0ppts m/m), and service sector prices were up 8.0% y/y (+0.0ppts m/m).

Non-mineral fuel exports up 46.7% y/y in January 2017

According to preliminary data for January 2017 from the Customs Committee, non-mineral fuel (NMF) exports were up 46.7% y/y to US$ 83.7mn while total imports were up 3.6% y/y to US$ 450.1mn. Growth in N-MF exports in January 2017 was driven by exports of vegetables (+45.2% y/y), textiles (+203.0% y/y), plastics (+67.6% y/y) and metals (+29.6% y/y), while lower exports of stone/glass (- 21.5% y/y) exerted downward pressure. Imports growth in January 2017 were driven by mineral fuels (+305.5% y/y), foodstuffs (+63.6% y/y), and textiles imports (+213.8% y/y), while imports of machinery (-30.9% y/y) and metals (-37.2% y/y) were down.

SOFAZ reserves down 1.3% y/y in 2016 to US$ 33.1bn

In 2016 State Oil Fund of Azerbaijan Republic (SOFAZ) posted AZN 0.4bn budget surplus, thanks to 21.9% y/y increase in its revenue and 1.8% y/y decline in expenditures in AZN terms. In US$ terms, however, revenues were down 21.8% y/y to US$ 5.9bn while expenditures were down 37.0% y/y to US$ 5.6bn resulting in US$ 0.2bn surplus. However, SOFAZ reserves were down 1.3% y/y in 2016 to US$ 33.1bn due to depreciation of some currencies against US$ in which SOFAZ holds investments.

Oil price: Brent oil price was down 1.6% w/w to US$ 55.8/bbl (up 61.8% y/y), while WTI oil price decreased 0.9% w/w to US$ 53.4/bbl (up 74.2% y/y). In AZN terms, Brent oil price was up 0.6% w/w to AZN 99.6 (up 85.1% y/y).

Exchange rate: On February 17, 2016, Central Bank’s AZN/US$ rate was 1.7352 (+0.3% w/w) and AZN/EUR rate was 1.8522 (+0.4% w/w). At Bloomberg AZN/US$ was trading at 1.7837 (+2.2% w/w) while AZN/EUR was trading at 1.8971 (+2.1% w/w).

Monetary policy rate: Monetary policy rate was unchanged at 15.0%.

Corporate Eurobonds: State Oil Company of Azerbaijan (SOCAR) Eurobond (SOIAZ 03/30) closed at 6.1% yield, trading at 107.3 (+0.2% w/w). International Bank of Azerbaijan Eurobonds (IBAZAZ 06/19) were trading at 100.4 (+0.1% w/w), yielding 5.4%.

Azerbaijan Sovereign Eurobonds (AZERBJ 03/24) closed at 101.5 (+0.3% w/w) at 4.5% yield to maturity