The exchange rate outlook in Azerbaijan in 2018: Expectations and Challenges

Abstract

The exchange rate of the national currency of Azerbaijan, the manat, will remain the main focus of socio-economic policy in 2018. During the course of the year, factors that will have a positive effect on the exchange rate of the manat – the price of oil, balance of payments, fiscal policy, monetary policy, political environment, etc. – will be stronger. In the course of this forecast’s preparation, risks of change in the current exchange rate policy were taken into account in light of important political factors which may emerge during the first 11 months of the year. As a result of the analysis, while there will not be a sharp drop in oil prices in the January - November 2018 period, there is a high probability that the national currency will remain steady, the probability of the manat strengthening with low interest rates will be low-middle and the probability of the manat cheapening is projected to be low. The influence of political factors on the determination of the manat’s exchange rate will weaken for the next period, while the price of oil will be an important indicator and the Central Bank will play a key role.