Factors of exchange rate formation December of the disappeared in the history 2008 for financial sector as for all economy of Azerbaijan was the period of test of accruing influence of world financial crisis. Owing to globalization and deepening of economic integration and as consequence of strengthening of financial and economic interdependence of the states, the financial and economic shock that has begun more than a year ago in the American market of mortgage crediting, by the end of 2008 has practically changed in world financial and economic crisis. The countries of Europe and Eurasia have got to a crisis corkscrew along with the USA. Rates of increase of economy and separate branches, especially buildings and the industries decreased, unemployment began to increase, cases of bankruptcies of the companies and physical persons have become frequent. Investors from the developed countries have started a conclusion of the capitals, have suspended crediting, creating thus pressure upon exchange rates of currencies. Falling, and in certain cases the termination of those or other kinds of activity have lowered requirement for oil and oil products that has affected falling of the prices for energy carriers. This factor also has affected US dollar reduction in price. US dollar exchange rate falling was reflected in decrease in competitiveness of exported production and on increase in volumes of cheap import, on decrease in imported inflation. Echoes of world crisis have reached also the Azerbaijan, the economy and financial-banking system of which by the end of 2008 began to feel some inconveniences and difficulties. And if in due time the necessary measures would not be taken by the Government and NBA, consequences of world crisis could be more notable. The first signals of approaching accident have started to be looked through in the beginning of year. In January occurs the information about the negative tendencies in the American economy, caused mortgage habitation crediting and intentions of FRC about decrease in the rate of refinancing. Growing geopolitical intensity in oil-producing countries (Iran, Iraq, Nigeria) signals about obligatory growth of the world oil price, which rises to a level in 100 US dollars for barrel. It caused increase of demand for the American currency that simultaneously with decrease in rates of increase of the American economy influenced dollar exchange rate falling to other currencies of the world. These tendencies were reflected and in the market of precious metals where the price of one gold ounces by the end of March has come nearer to 1000 US dollars. On this background extraction and export of oil from Azerbaijan on the world markets of energy carriers grew. The national economy continued to show high rates of increase. Concerning the first quarter of 2007 GDP manufacture has grown on 13,8% to 8,2 billion manat. Thus the share of not-oil sector in GDP has decreased to 29,1% against 39% in last comparable period. For three months the volume of investments into a national economy has increased by 21,4 million manat also has made 1409,2 million manat. The country Foreign trade turnover for three months has increased on 40,9% and has reached 2896,2 million dollars. Thus export has increased on 68,0% and has made 1544 million dollars, whereas import - on 19,0 % to 1352,2 million dollars. Growth of volumes of deliveries and incessant rise in prices for oil provided receipt increase in the country of petrodollars. It promoted the dollarization of economy and simultaneously to US dollar exchange rate falling in relation to manat. Besides, it caused necessity of increase of a manat expansion for rate stabilization. Imported inflation grew in these conditions and competitiveness of the Azerbaijan economy on foreign markets decreased. In March concerning February of this year consumer prices of the goods and services have raised 3,1%. In comparison with January - March of 2007 the consumer price index in first three months of current year has made 116,5%. In a certain measure it was promoted also by growth of monetary mass. In comparison with the corresponding period of last year aggregate M2 has grown on 99,7% and has reached 4428,2 million manat. Thus the share of available funds on the beginning of April of this year has made 61,7% or 2734,5 million manat with growth by the end of March of last year in 2 times. Such growth of monetary mass partially explained by manat intervention, which besides promoted growth of foreign currency reserves of NBA which on the beginning of April, 2008 have reached 4257,1 million US dollars, and strategic foreign currency reserves taking into account means of SOFAR have reached 10 billion dollars. During all first quarter under the influence of aforementioned factors the official rate of the American currency to national manat smoothly fell. Unlike American, the rate of unified European currency promptly rose upwards. Cost of the Russian rouble in manats grew slowly. The same tendencies were observed in the internal cash market. NBA for maintenance of macroeconomic stability continued to take measures on perfection of the monetary policy answering to the international standards. In March of this year NBA has made the decision on the beginning of realization of the concept on cost deduction of manat concerning a basket of currencies at stable level. Introduction of two-currency baskets and manat interventions should stop strengthening of manat. At the same time, increase of consumer price indexes and services have caused necessity of acceptance of measures on social protection of lower-income strata and within the limits of state budget updating to allocate 400 million manat for increase of the salary, pension and grants. According to analysts though the economy of Azerbaijan and its bank and crediting system continued to show a sustainable development, nevertheless the first signals of world crisis have started to have an effect. Certainly, it was early to speak both about economic, and financial crisis in Azerbaijan. However in the conditions of growth of foreign investments, external loans and increase in receipt of petrodollars problems, which demanded the deep analysis and acceptance of corresponding decisions began to be shown. The condition of the financial market of Azerbaijan in many respects remains under the influence of set of factors of the global character expressed through growth of the world prices for energy carriers, grain crops and articles of food, through crisis of economy of the USA and US dollar exchange rate falling to currencies of the leading countries of the world, through strengthening of positions of euro. June inflation reflected new jump of the prices for oil, and also on a number of other raw goods. Compromise search between inflation and economic growth was required. Developing countries and their Central banks have started to raise norms of obligatory reserves under credits and interest rates. The rate of inflation in Azerbaijan for six months concerning the corresponding period of 2007 has made 120,2%, and concerning May of 2008 thanks to influence of seasonal factors - only 0,1%. Analysts consider that on price index growth the influence has rendered increase in monetary mass. Aggregate M2 of the beginning concerning of year has increased on 12,1% and has simultaneously exceeded volume on the end of June, 2007 on 79,8% and has reached 4933,2 million manat. In structure of M2 cash money resources have made 64,7% or 3193,8 million manat. In comparison with the beginnings of the year they have increased on 17,7%, and in comparison with the 1st July of 2007 - on 85,4%. On a rise in prices rendered the negative influence on imported inflation and a growing stream of petrodollars with necessity of manat interventions on the internal currency market. The rise in prices for energy carriers was reflected also in the foreign trade turnover of Azerbaijan, which for six months has increased more than in 4,1 times and has reached 20,6 billion US dollars, including import has made 3,1 billion US dollars with growth on 125,6%, and export - 17,5 billion US dollars with growth in 6,9 times. Apparently, the positive balance of the foreign trade balance was formed at a sum of 14,4 billion dollars. We will notice that except the positive export gain the foreign currency stream in the country was provided at the expense of foreign investments. In the meantime the situation in the world financial markets and even in economy of many countries remained enough difficult. Fears of experts, which predicted considerable easing of world demand have started to be embodied in a reality. The economy of the USA has lowered turns. Crisis began to cover even the prospering countries, most apparently. Therefore the enthusiasm of purchases of oil considerably weakens. This situation has started to make the negative impact and on others commodity markets. However demand for dollar did not fall also it was a success. Strengthening of the American currency was promoted by the facts of decrease in business activity in the European countries. Decrease in rates in the eurozone has made currency of region less attractive to investors. The economy of Japan has lowered his paces. In these conditions FRC of the USA reduced a discount rate up to 2%, trying to constrain the further falling of growth of a national economy thereby. The European Central Bank the same summer months bent all efforts to an establishment of the rigid control over inflation. In the developed severe conditions the Government of the USA in September of 2008 has made decision to take under the guardianship mortgage agencies Fannie Mae and Freddie Mac since they are very strongly twisted in a financial system of the country and bankruptcy of any of them will shake the financial markets of the world. Nevertheless a number of big banks of the USA in September declared bankruptcy procedure. In the ways of searching of the coordinated decision on tasks of negative consequences of world crisis FRC of the USA, ECB, the Bank of Japan and England declared joint actions for intensity easing in the markets. Excitements at stock exchanges, and also economic recession along with others became the reasons of falling of the prices for oil. On trading platforms of world stock exchanges share transactions, as a rule, came to the end with decrease in leading indexes. During these period processes of merge of big banks in the USA, Great Britain and Japan have amplified. As a result of a large collapse of share prices at the Russian stock exchanges the trades at RTS and MICEX stock exchanges have been suspended. Considering a situation in the commodity-raw markets, characterized by decrease in the oil quotations, the developed model of integration of Azerbaijan in economic on the basis of deliveries of energy carriers, henceforth does not meet modern requirements, depends on a conjuncture of the world market and naturally puts problems of an indispensable diversification of a national economy and by that optimization of structure of gross national product. Meanwhile, following the results of nine months of 2008 in the country it has been made GDP for the sum of 30,4 billion manat with a gain by corresponding period of last year on 15%. Thus the deflator has risen to 132,7% that testifies to rise in price of manufactures and services. Retail prices in the consumer market have in turn risen. Nine months of this year for the industry, investments, transport and construction have come to the end with high rates of increase, but sphere of services did not lag behind them, that finally have provided growth of indicators of social development. Following the results of nine months population incomes have increased on 35,6%, and in calculation per capita - on 34,1%. Solvent demand has grown up. Money mass in a broad sense - unit M3 following the results of nine months has grown concerning the similar period of 2007 on 54,5%, and concerning the beginnings of the year - on 29,7 % and has made 7649,7 million manat. Thus in structure of M3 the share of money mass in a foreign currency has made 27,9% with a gain by 9 months of 2007 on 39,5% and decrease concerning the first half of the year of reporting year on 11,2%. Unit M2 reflecting money mass in manat concerning 9 months of 2007 has increased on 61,2% and has reached 5514,5 million manat, including available funds (Ì0) have made 3632,3 million manat with a gain to the beginning of year on 33,9% and by the similar period of last year - on 77%. Relative density Ì0 in the aggregate M2 made 65,9% against 61,6% in the beginning of year and 60% in September of 2007. Inflation for January-September of 2008 has risen to 121,5%, and in January - on 114,6%. We will notice, that the volume of money mass and a rate of inflation were regulated on the basis of a monetary policy of NBA, where the important place is taken away also to regulation of a national manat rate to leading foreign currencies. Apparently the financial market of Azerbaijan continued the steady functioning though some tendencies of insignificant decrease in volumes of currency transactions were observed. It is final, confirms the thesis that the financial market of the country in many respects remains under the influence of set of factors of global value and internal factors. As to external factors we will notice that in October of 2008 signs of began to be shown more strongly that the wave of the American financial crisis gets global character and to threaten to change in world crisis. Moreover, because of sharp decrease in liquidity financial crisis has led to reduction of volumes of bank crediting and by that began to influence negatively rates of increase of economy. Finally it has led to sharp falling of the prices for oil. Oil consumption in the USA in October was reduced to 7,8% on comparison by the same period of 2007. It is once again acknowledgement of that one of the factors operating today the prices for oil is state of the economy. Decrease in rates of economic growth excites also the OPEC, which is disturbed in the speed from which price for oil more and more keep away from level wished by them in 80 US dollars for barrel. By the end of October the price of an oil basket of the OPEC has fallen below 60 dollars SSHA/BARREL though and it was known that the alliance countries have agreed about decrease since 1st November of 2008 of quotas on an oil recovery on 1,5 million barrels a day. To suspend falling FRC has lowered the interest rate of overnight and has simultaneously allocated on 30 billion US dollars to the central banks of Mexico, Brazil, South Korea and Singapore for the credit markets of developing countries. Simultaneously with it the IMF, in turn, has made the decision on increase twice of limits of loans for developing countries without a presentation of additional conditions. The information on decisions FRC and IMF has induced the central banks of the leading developed countries to unite for struggle against financial crisis, for support of banks, stabilization of the financial-credit market, increase of level of liquidity. At the summit of the European Union spent in the beginning of October, 2008 in Paris the counteraction plan to world financial crisis on which the governments of the European countries will give to the main European banks of a guarantee on interbank credits has been accepted will allocate for these purposes monetary resources. Despite taken measures, according to analysts, they were only first steps, and negative influence of global crisis will keep still for a long time. However, depth of world financial crisis and weight of a current situation has forced organizers to reconsider a format of a meeting and to invite for a negotiating table of leaders of developing countries (Argentina, Australia, India, Brazil, China, Russia, Turkey, etc.). So in November of 2008 in Washington the summit of "the big twenty» - G-20, uniting 19 of 25 largest economy of the world plus the European Union has taken place. We will notice that 20% of world GDP, 80% of world trade and about 70% of the population have fallen on G-20. Results of the summit have disappointed the optimists hoping for concrete measures on elimination of crisis. Nevertheless, participants of the summit could define the general directions of anti-recessing measures, in which it is necessary to move, including control toughening over large world banks, market regulation of derivatives and securities, and also reform of the international finance. Reserved tone of final statement of G-20 shows that crisis and its consequences will negatively influence economy of the countries of the world not less than one and half-two years. It will influence in turn the further reduction of real growth of bank crediting. It will be most appreciable this process to occur in the countries of Europe to developing economy, but as a whole to some extent will mention all regions. Delay of growth of bank crediting is caused by a number of the reasons and first of all reduction of the sizes of loans for investments into a global financial system. The unwillingness to accept risks has increased in particular from outside banks and became the reason of the domino effect shown in variety of defaults and absorption of banks in the countries with developed economy. It became a principal cause of interventions from outside the states in the increasing quantity of the countries. Same occurrence of problems with liquidity in banks of some countries speaks. The countries used a wide tooling to smooth consequences of credit crisis, the majority of the central banks resorted to the help of monetary tools. According to experts of IMF, the optimum approach - to use the monetary and credit, trading and taxes-budgetary policy, to develop system of social protection with an accurate address orientation. IMF research shows that approximately 60 countries with low and average incomes will undergo to risk of exhaustion of the reserves to dangerously low levels if the prices remain same as now, or will raise. But against world financial crisis and prompt falling of the prices for energy carriers the monetary authorities of Azerbaijan could provide growth of foreign currency reserves of NBA, strategic foreign currency reserves having created thus a necessary pillow of safety for steady and long-term social and economic development of Azerbaijan. The generalizing macroeconomic indicator -GDP manufacture for 2008 has exceeded 38 billion manat with an annual gain on 10,8%. Thus per capita this indicator has reached 4439,9 manat that more than a last year's indicator on 9,5%. The sphere of services grew in GDP structure with advancing rates - 113,7%, and rates of a gain of industrial sphere have made 9,6%. On a share of this sector of economy in GDP in total amount was fallen 70,8%, and spheres of services - 22,1%. The deflator of GDP has a little decreased, that was reflected also in decrease by the end of the year the inflations, which level for a year has made 20,8%. On inflation decrease, and non-cash - falling of the prices for oil and in this connection, level of imported inflation, and also size of money mass - aggregate M2, which for a year has increased by 38,1%, i.e. to 6081 million manat, including available funds have increased by 52,8% has affected 14,6% or to 1985,3 million manat. Apparently level of a monetization of a national economy makes only 16% thus relative density of available funds in aggregate M2 - has raised to 68,2% whereas in 2007 this indicator made 61,6%. Obviously, there is not absolutely recommended parity between growth of GDP and growth of money mass. At annual growth of GDP on 10,8% money mass Ì2 has increased by 38,2% i.e. growth of money mass advances GDP growth in 3,5 times. We will notice as well that the high prices for exported oil, which it is unceasing grew to 147 dollars/barrels up to September, 2008 and restriction of budgetary expenses for the purpose of restraint of pressure of demand have led to that all year the state budget was executed with considerable proficiency. Following the results of eleven months the country state budget is executed under incomes on 9,4 billion manat with a gain on 68,7%, and on expenses - 8,3 billion manat with a gain on 71%. As a result proficiency has made 1,1 billion manat. In relation to annual GDP incomes have made 24,7%, expenses of 21,8%, and proficiency - 2,9%. The mentioned facts confirm the thesis that in the course of inflation in Azerbaijan monetary factors play insignificant - a supporting role.
Volume indicators of currency market The volume of the internal currency market of the country in December of this year has made 3368,2 million manat in a manat equivalent that on 28,2% is more than last month. In comparison with the corresponding period of last year the volume of the internal currency market has grown on 81,4%. In currency market structure in comparison with the last month the share of the trades with US dollars, has grown from 56,2% to 61,3%. The increase in a share of dollar transactions has occurred at the expense of reduction of a share of the trades with the unified European currency from 42,6% to 36,6%. In accounting month the share of the trades with roubles has increased from 1,1% to 1,6%, and the trades with pounds from 0,2% to 0,5%. We will notice that in December of 2007 the share of the dollar trades made 77,3%, the share of the trades with euro - 20,5%, the rouble trades - 2%, and the trades with pounds was occurred 0,3% (chart ¹16). If will compare monthly volumes of the currency market with similar indicators for 2007 it is possible to notice that the least gain was observed in March - 33,6%, and the maximum growth took place in October of current year - in 2,7 times (chart ¹17). As a whole for a year the volume of the internal currency market has made 26,56 billion manat that on 75,4% is more than for 2007. In the expiring year last quarter the maximum volume of the currency market - 9,3 billion manat in a manat equivalent was observed, it exceeds more than in 2 times volume in the first quarter of 2008 and in the corresponding period of last year. In comparison with the second and third quarter the volume of the internal currency market has grown on 44,8% and 45,6% accordingly. In structure of the currency trades for 2008 the American currency occupied 70% of all turnover whereas on a euro share dropped out 27,8% of all trades. Relative density of rouble transactions in total amount has made 1,9%, and a share of the trades with the British pounds - 0,3%. In comparison with 2007 the share of the trades by US dollars was reduced on 10,1 point, a share of the trades of rouble - on 0,3 points, a share of the trades by pounds in 2 times, and relative density of operations with the unified European currency has grown on 10,7%. The volume of dollar transactions in comparison with 2007 has grown on 60,3% to 22,7 billion dollars. For the same period the trades with euro have grown in 2,9 times almost to 6,4 billion euro, the trades with roubles have increased on 46,3% to almost 16,1 billion roubles. The volume of the trades with the British pounds this year in comparison with the past was reduced to 8,1% from 53 million to 48,8 million pound sterling. The Open Interbank Currency market (ÎICM) in accounting month has made 15,4% from the internal currency market. Volume of ÎICM has reached almost 519,1 million manat in a manat equivalent that on 82,3% is more than in the similar period of last year and on 4,3% more than in November of this year More a turn quarter on ÎICM - 27,3% were formed on the trades with the general for the majority of the European countries currency. Relative density of the dollar trades has made 70,5%, the trades with roubles - 1,4%, and the trades with pounds - 0,8%. According to the chart ¹18 from the beginning of year till July the share of the dollar trades in ÎICÌ was lower, than in summer and autumn months. During this period in the Open market more of attention began to give to the auctions with the unified European currency. In December of this year the share of dollar transactions has fallen, as the reason for that decrease in volume of the dollar trades concerning the last month on 11,6% to 456,2 million US dollars has served, i.e. on 76,6% it is more than in December of 2007. The volume of the trades from euro for a month has grown on 84,3% to 128,9 million euros that in 2,7 a time is more than in the similar period of last year. Trade on the British pounds for a month has grown in 4,8 times to almost 4,4 million pounds that in 11 times more than in the corresponding period of 2007. The greatest volumes in the trades on the Russian roubles took place in the second quarter of current year. In December the volume of rouble operations concerning November has grown on 10% to 245,7 million roubles that exceeds a similar indicator for December of 2007 only on 7,2%. In common from the beginning of year the volume of the trades in ÎICÌ has made 15,5% from the internal currency market of the country or nearly 4122,3 million manat in a manat equivalent that on 91,3% is more than for 2007. In annual currency structure increase of a share of the trades with euro at the expense of reduction of relative densities of other currencies was observed. So, relative density of US dollar was reduced from 81,2% to 74,2%, the share of the trades with roubles has fallen about 4% to 2,5%, and the trades with pounds - from 1,1% to 0,3%. As a result on the trades with the unified European currency in 2008 23% of a turn were formed in ÎICÌ against 13,7% in 2007. It is enough to notice that in comparison with last year the volume of the trades with euro has grown in 3,2 times while the volume of transactions with dollars has increased on 83,2%, with roubles - on 15,7%, and with pounds also was at all reduced to 45,4%.
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