Country Report Azerbaijan June 2011

Outlook for 2011-15: Exchange rates

The authorities appear to have supported the currency in 2009, as the manat remained stable against the US dollar at around Manat0.8:US$1, even though oil prices were lower than in 2008. As a result, foreign reserves fell to a 14-month low of US$4.9bn in July 2009. However, foreign reserves have since recovered and climbed to almost US$7.4bn in April 2011, nearly US$1bn above the peak recorded in December 2008, before the impact of the global economic crisis was felt. We expect the currency to remain stable in 2011, at around Manat0.8:US$1. The Central Bank's continuing intervention in the foreign-exchange markets in the initial part of the forecast period will prevent rapid fluctuations in the exchange rate. From 2012 onwards a return of investor risk appetite and higher capital inflows will put the manat on a modest appreciating trend, to Manat0.74:US$1 in 2015.

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