In January-April 2019, the volume of lending to legal entities in Azerbaijan decreased by 2.7 percent compared to the beginning of the year, Trend reports referring to Central Bank of Azerbaijan (CBA).
"Over four months of this year, total lending decreased by 0.1 percent. In particular, lending to legal entities decreased by 2.7 percent," CBA said.
The Bank believes that this situation has a negative impact on the development of the economy in the country. "The decline in credit activity in recent years has a negative impact on economic growth and aggregate supply, which impedes macroeconomic and financial stability," CBA reported.
In order to reduce inflation, CBA regularly holds deposit auctions, as well as auctions for the placement of notes, which has a positive effect on the growth of the money supply.
According to the Bank, the money supply in Azerbaijan increased by 6.6 percent compared to the beginning of the year, which is an acceptable indicator. Regular sterilization operations on the market by the Central Bank affected the decrease in inflation, which, in turn, affects the budget surplus.
The Central Bank also believes that, despite the conditions of low credit activity, the level of liquidity of the banking system remains in the surplus position.
In light of the current situation, CBA is watching foreign investment activity of banks this year. Future decisions on the parameters of the interest rate corridor will be based on the actual forecast of inflation, inflationary expectations, fluctuations in the external environment and reactions of financial markets.
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