Accounting Chamber comments its opinion that Oil Fund`s revenues likely to decrease


January 23, Fineko/abc.az. The Accounting Chamber of Azerbaijan (ACA) has presented a conclusion on the draft budget of the State Oil Fund for 2020.

ABC.AZ reports that the conclusion says that the reduction of profitability of investment instruments placed by the Fund may be conditioned by debt obligations in US dollars at global financial markets compared with the last few years and the expectation that the profitability of the money market portfolio will be lower in 2020 than in the past year.

The recent macroeconomic changes in the US economy, including new trends can be considered as a cause: "Taking into account the weakening of the US economy, including inflation and lower economic growth indicators, one can say that the Federal Reserve has already cut interest rates once in July of 2019. At the same time, the Eurozone observes low rate of economic growth.

In addition, there is a significant mass debt burden in the Eurozone countries, and the observed economic weakening indicates the application of soft monetary policy for the near term, however, given that the recent trend towards growth of profitability in the securities markets with fixed income in euro continues declining. This, in turn, creates an expectation of negative profitability for the euro portfolio in 2020. At the same time, given the impact of the recession in China's economy last year on economic growth and sovereign bond yields, as well as the reduction in the interest rate of the Central Bank of Turkey in July, it can be assumed that the expected average return on investment in other currencies will be lower than last year. And there is tension in the stock markets.

The continuing uncertainty of Brexit in the UK is seen in creation of vulnerability in the business environment. On the other hand, the possibility of further growth of the fiscal policy prevailing in the Eurozone can be regarded as factors that contribute to development. Taking into account the above-said and the probability of deepening volatility in stock markets, we consider it appropriate to forecast returns based on the principle of economical approach. It is planned to make essential changes in the investment policy aimed at minimizing the risks that have arisen and may arise on the market conditions of securities."