The European Bank for Reconstruction and Development (EBRD) forecasts Azerbaijan's economic growth at 2% in 2026 and 2.5% in 2027, reads the bank's February release of its Regional Economic Prospects update, Report informs.
"The growth outlook remains sensitive to hydrocarbon prices and production volumes. On the upside, regional connectivity and trade initiatives enabled by the US-brokered peace framework with Armenia as well as continued large-scale investment in renewables could boost growth and economic diversification," the EBRD noted.
"Economic momentum weakened in 2025, with real GDP growth slowing to 1.4 percent from 4.1 percent in 2024. The deceleration was driven by a 1.6 percent contraction in hydrocarbon output.
Growth in non-hydrocarbons sectors moderated from 6.1 percent in 2024 to 2.7 percent, while consumer price inflation accelerated to 5.6 percent in 2025, driven mainly by prices of food and services, although it remained within the central bank's target range of 4 percent±2 percentage points.
The Central Bank of Azerbaijan implemented two 25 basis point cuts in July and December 2025, bringing cumulative easing since November 2023 to 225 basis points. Furthermore, on February 4, 2026, the regulator again lowered the rate by 0.25 percentage points to 6.5%. The next decision on the interest rate corridor parameters is expected on April 2.
Despite softer growth, fiscal and external buffers remained robust. The state budget posted a surplus of 0.4 percent of GDP in 2025. Public debt is low, at around 20 percent of GDP as of September 2025.
The foreign trade surplus narrowed in the first three quarters of 2025 amid lower energy export revenues and higher imports of goods. Foreign reserves, including assets held by the sovereign oil fund and foreign exchange reserves of the central bank, reached $85.1 billion (112 percent of GDP) by December 2025."
The bank's analysts also noted changes in the US tariff regime. Prior to the Supreme Court's decision, the nominal import duty rate for Azerbaijan was 27.5%. Under the International Emergency Economic Powers Act (IEEPA) and with existing exceptions, the effective rate was reduced to approximately 2%. After these regulations were terminated, the tariff increased to 25.6%. If a 10% tariff were introduced (according to S122), the rate would return to 27.5%, and if 15% were introduced, it could reach 28.5%.