WB renews economic growth forecasts in Azerbaijan

The World Bank (WB) predicts economic growth in Azerbaijan at 2.3% in 2024, 2.4% in 2025 and 2026, reads an April WB report on the economies of Europe and Central Asia, “Unleashing the Power of the Private Sector,” Report informs.

Compared to the January forecast, the GDP growth rate in 2024-2025 decreased by 0.1 percentage points.

“Economic growth is anticipated to reach 2.3 percent in 2024, driven by a less pronounced decline in crude oil output attributed to the commissioning of new oil platforms. Non-energy sector growth is expected to improve to 4 percent in 2024, primarily due to robust expansion in the construction sector fueled by public sector investments in reconstruction. Other sectors are expected to sustain their growth rates. On the demand side, consumption growth is expected to stabilize while investment growth is projected to remain moderate, supported by public investment but held back by anemic private investment growth,” reads the report.

In the medium term, growth is forecast to hover around 2.4 percent but could accelerate if backed by a faster pace of implementation of structural reforms.

At the same time, during 2024-2026 a 3% growth is expected in agriculture compared to a 3.2% growth in 2023, in industry growth is projected at 0.2% compared to a decrease of 0.9% in 2023, in the services sector growth is expected at 5.3% in 2024-2025 and 5.2% in 2026 compared to 3.8% growth in 2023.

According to the report, gross fixed capital investment will increase by 5.4% in 2024, 3.9% in 2025, and 3.5% in 2026. In 2023, growth was 9.6%.

“Economic growth slowed to 1.1 percent in 2023, as a result of declining crude oil production and lackluster growth in the non-energy sector. Annual inflation fell sharply to 2.1 percent as both external and domestic pressures eased. Buoyant energy prices sustained sizable external and fiscal surpluses. In the medium-term, growth is projected to converge to about 2.5 percent as the fall in crude oil production eases and non-energy sector growth picks up.

Azerbaijan’s continued reliance on hydrocarbons as a major source of export and fiscal revenues remains its main vulnerability. This challenges long-term growth prospects because of declining oil production, oil price volatility, and the global transition away from fossil fuels.

Azerbaijan’s hosting of COP29 in November 2024 may be an opportunity to boost climate mitigation and adaptation efforts. Elimination of distorting fossil fuel subsidies could substantially reduce emissions and boost the green transition,” the bank noted.

The Azerbaijani government forecasts GDP growth at 2.4% for 2024.