Turkey’s annual inflation climbed in July to 47.83 percent, up sharply from 38.2 percent. A working group has been set up in Armenia to study the possibilities of creating a new high-speed corridor from India to Europe through Armenia. Government of Azerbaijan increased its inflation forecast.
Here is a rundown of the latest economic, business and political developments around Georgia's neighboring Turkey, Azerbaijan and Armenia during the last week.
Turkey
Turkey’s annual inflation climbed in July to 47.83 percent, up sharply from 38.2 percent, official data showed. In line with expectations, the new figure comes a week after the central bank more than doubled its year-end forecast to 58 percent from 22.3 percent after years of doubts from independent economists about the official rate.
Turkey’s purchasing managers index (PMI) for its manufacturing sector was down to 49.9 in July, decreasing from 51.5 in June. Business conditions were broadly stable in the country's manufacturing sector through the month. Inflationary pressures caused a slowdown in new orders and sales in the sector.
Turkey’s exports in July totaled $20.09 billion, up 8.4% on a yearly basis. This January-July, the country's exports totaled $143.4 billion, a slight annual decline. During the last 12-month period, exports rose 2.1% to $253.38 billion. The share of medium-high and high technology in the country's overall exports rose from 36.9% in 2022 to 40.8% in the first seven months of this year. In July, Turkey’s imports rose 11.1% to $32.47 billion, while in the first seven-month period they totaled $217.5 billion, up 5.1% on a yearly basis. The country's energy imports dropped 26% to $41.1 billion in the seven-month period.
President of Turkey Recep Tayyip Erdogan said he hoped that Russian leader Vladimir Putin would visit Turkey in August, as Ankara works to revive a key deal that allowed Ukraine to export its grain via the Black Sea. "There's no precise date yet but my foreign minister and intelligence head are holding talks," Erdogan told reporters after Friday prayers at a mosque in Istanbul. "I believe that this visit will take place in August," he said. The remarks came after Erdogan’s office on Wednesday said the two leaders had agreed on Putin’s visit. No timetable was provided but a senior Turkish official said discussions between Ankara and Moscow are ongoing for a visit in late August.
Europe’s development bank on Friday said it was providing a $109 million loan to the largest private lender in Turkey for on-lending to businesses and individuals affected by the devastating earthquakes that struck the country’s southeastern region.
Turkey's banking sector posted a net profit of TL 250.3 billion ($9.69 billion) in the first six months of 2023. The sector’s net profit was up 47.9% compared with TL 169.15 billion ($585 million) in the same period last year, according to data from the Banking Regulation and Supervision Agency (BDDK). Total assets of the sector rose 63% year-over-year to TL 19.1 trillion ($739.55 billion) as of the end of June. Loans, the biggest sub-category of assets, were TL 10.09 trillion ($387.55 billion), up 60.09% compared with last year.
Armenia
Transport links with India are still undeveloped and logistics are not easy. The trade turnover with India has a huge potential and according to our proposal and the Prime Minister's decree, a working group has been set up to study the possibilities of creating a new high-speed corridor from India to Europe through Armenia," Economy Minister Vahan Kerobyan said. Kerobyan was chosen to lead this group, whose task is to ensure that cargoes from India reach Europe through Armenia as quickly and cheaply as possible. "The group is working in this direction, and I think that by the end of the year we will have concrete proposals on mechanisms of how to quickly and relatively cheaply create a corridor for cargo transportation from India to Armenia and further to Europe and in the backward direction," the minister said.
Armenia’s Central Bank decided to cut the refinancing rate by 0.25 percentage points, setting it at 10.25%. The Lombard repo rate was also lowered to 11.75% and the rate of borrowing by commercial banks was dropped to 8.75%. This is the second lowering of the refinancing rate since the beginning of the year. On June 13, the Central Bank cut it by 0.25 percentage point setti9ng at 10.5%.
Fitch said it sees signs of overheating in Armenia’s property market. There are signs of overheating in Armenia’s property market, with residential property prices rising by an average of 10% yoy in 1H23, owing mainly to the heightened demand from the population surge, Fitch Ratings said as it has upgraded Armenia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB-' from 'B+'. The Outlook is Stable.
Armenia's 12-month consumer price index (CPI) in July 2023 was down 0.1%, the National Statistical Committee (NSC) said. It said also that 1% price drop was recorded in July this year compared to June of the same year. Prices increased by 3.6% in January-July 2023 compared to the same period of 2022. Prices for food and non-alcoholic beverages decreased 3.9% in July 2023 compared to July 2022. Compared to June 2023 they were down 2.8%.
Petrol price in Armenia was 14.8% cheaper in July 2023 compared to July 2022, while diesel fuel was 30.6% cheaper. In July 2023 petrol price increased by 11.1% compared to June of the same year, while diesel prices decreased by 1.5%. At the same time, petrol price rose by 2.9% in July this year compared to December last year, while diesel price fell by 18.9%, respectively. Overall, prices of non-food goods in July 2023 compared to July last year were down 0.3%. In July 2023, a deflation of 0.1% was recorded compared to June of the same year.
Armenia is very close to moving to a trade surplus, Armenian Economy Minister Vahan Kerobyan said. The Minister commented on Fitch Ratings' forecast that the national currency, the dram, may moderately depreciate in 2023-24, albeit still to levels stronger than before the start of the Ukraine conflict. "Naturally, the appreciation of the dram has a negative impact on exports, but you know that the ratio of trade turnover to GDP has reached 60.2%, which is a historic high, and the trade balance has narrowed to 1.6% of GDP, which is a historic low. This shows that Armenia is very close to moving to a trade surplus. We are working intensively with our exporters to diversify markets, because dependence on one market is dangerous from a business point of view," Kerobyan said. According to official statistics, Armenia’s foreign trade in the first half of 2023 surged by 73% yoy to about $8.9 billion. Armenian exports increased by 72.8% to $3,266 million, while imports totaled $5,633 million, recording a 73% increase compared to January-June 2022.
According to a Eurasian Development Bank (EDB) review of infrastructure investments and projects to be implemented across Eurasia Germany will provide EUR 12 million to Armenia for the implementation of a program to expand the use of renewable energy sources.
U.S. Agency for International Development (USAID) Administrator Samantha Power has joined Secretary of State Antony Blinken's call to unblock the Lachin corridor. "Food insecurity and medicine shortages in Nagorno-Karabakh are very troubling. The Lachin corridor is key to delivering life-saving aid to the people of Nagorno-Karabakh. I join Blinken's call for the free movement of commercial and humanitarian goods through the corridor," Power wrote on Twitter. Earlier, U.S. Secretary of State Antony Blinken, in a conversation with Azerbaijani President Ilham Aliyev, emphasized the urgent need to ensure the free transit of commercial, humanitarian and private vehicles through the Lachin corridor and the importance of maintaining "positive momentum" in peace talks. Blinken also pointed to the need for compromise on alternative routes to allow humanitarian supplies to reach the people of Nagorno-Karabakh."
Azerbaijan
This year, the average annual inflation in Azerbaijan is forecasted to be at the level of 10.4%, the Ministry of Finance said in a report on the half-year implementation of the state and summary budgets of 2023 and the document of forecasts for the end of the year. “Although the initial forecasts assumed average annual inflation at 6.9%, the actual indicators at the time of revision are predicted to be at 10.4%, taking into account the expected trends,” the ministry said. According to the forecasts, this is 3.5 percentage points higher than the initial forecast.
Gas deliveries from Azerbaijan to Italy via the Trans-Adriatic Pipeline (TAP) in June 2023 amounted to 784 million cubic meters, a decrease of 14.6% year-on-year. In January-June 2023 gas deliveries from Azerbaijan amounted to 4,901 billion cubic meters (-2.4% y-o-y). In January gas deliveries to Italy from Azerbaijan through TAP amounted to 852 million cubic meters, in February – 701 million cubic meters, in March – 898 million cubic meters, in April – 860 million cubic meters, in May – 806 million cubic meters. The TAP pipeline is intended for the transportation of gas from the Shah-Deniz field in the Azerbaijani sector of the Caspian Sea as part of "Stage-2" of its development in Europe. In 2022 Azerbaijan increased gas export by 18% to 22, 3 billion cubic meters, with 11,4 billion cubic meters (+39%) to Europe.
Russia accounted for the biggest part of Azerbaijan's non-oil exports - $148.3 million - in June of this year. Russia is followed by Turkey ($47.9 million) and Georgia ($19.1 million). The list of exported non-oil products of the country was topped by cherry and sweet cherry in June 2023 ($40.1 million). Then come tomatoes with exports at $29.3 million and ginned cotton with exports at $18.3 million.
AzerGold CJSC, one of the main exporting state companies representing the non-oil and gas sector of Azerbaijan, attracted 1 billion 716 thousand 495 manats ($589m) to Azerbaijan's economy as a result of the sale of gold and silver on the international market. As a result of the 79th export operation performed by the company, 3.7 thousand ounces of gold and 11.4 thousand ounces of silver were sold in the international market and AZN12.8m ($7,5m) of sales income was obtained. The volume of gold exported by AzerGold during the entire period of activity reached 361.9 thousand ounces, and the volume of silver reached 723.5 thousand ounces.
For six months of this year, the Azeri-Chirag-Guneshli (ACG) and Shah Deniz block of fields exported about 115 million barrels of oil and condensate to the Sangachal terminal through underwater oil and gas pipelines. This is 1 million, or 0.9% more than in the first half of 2022. For six months, more than 114 million barrels were exported through Baku-Tbilisi-Ceyhan (BTC), which is 7 million barrels or 6.5% more than in the first 6 months of last year. In the first half of this year, 1 million barrels were exported through the Western Route Export Pipeline, which is 6 million barrels or 85.7% less than in the same period in 2022. During six months, the terminal exported an average of more than 72 million cubic meters (about 2.542 billion cubic feet) of Shah Deniz gas daily. This is also 3 million cubic meters, or 4.35% more than in January-June 2022.
The assets of the State Oil Fund (SOFAZ) are expected to reach $51.7 billion, as stated in Finance Ministry's "Certificate on the semi-annual execution of the state and consolidated budgets for 2023 and the document on expectations for the end of the year." The document states that this will happen at crude oil prices at $60 per barrel, taking into account actual revenues in 2023. Each change in the price of crude oil by $10 leads to an increase or decrease in the fund's assets by about $0.7 billion compared to the scenario of the crude oil price of $60. Thus, as of January 1, 2024, the fund's assets are expected to reach $50.3 billion in the scenario of the oil price of $40, which is $1.4 billion less compared to the oil price of $60, and $53.1 billion in the scenario of $80 ($1.4 billion).
The Finance Ministry of Azerbaijan has updated its forecast for the growth of gross domestic product (GDP) in the country this year. According to the forecasts presented by the Ministry of Economy when preparing the draft budget for 2023, GDP will be 106 billion manats ($62.35 billion), non-oil and gas GDP - 73.3 billion manats ($43.11 billion), and real growth rates - 2.7% and 4.5% respectively. However, along with the macroeconomic results of the past period in 2023, fiscal performance indicators and commodity market conditions led to the refinement and updating of macroeconomic forecasts for the current year. According to the updated macroeconomic forecasts, in 2023, GDP under the base scenario will grow by 1.8% in real terms, to 111.6 billion manats or about $65.64 billion (5.6 billion manats or about $3.2 billion more than the previous forecast), including non-oil and gas GDP in real terms will grow by 4.9% - up to 77.7 billion manats or $45.7 billion (4.4 billion manats or $2.5 billion more than the previous forecast).
In January-July this year, the total value of deals concluded on all financial instruments at Baku Stock Exchange CJSC (BSE) amounted to 9,777,082,000 (+18.8%) manats ($5.8 billion). The number of deals concluded in the last year increased by 27.9% to 6,515. State securities accounted for 41.2% of BSE's turnover, or 4,26.66 million manats, marking a 11.5% decline. During the reporting period, the value of transactions on the corporate securities market increased by approximately 32.1% to 761.581 million manats ($448 million), the value of repo transactions increased by approximately 60.7% to 4,988,841,000 manats ($2.9 billion).
