The World Bank (WB) has improved its economic growth forecast for Azerbaijan for 2024, raising it by 0.9 percentage points compared to June estimates, to 3.2%, according to the WB's economic outlook report for the Europe and Central Asia (ECA) region titled "Better Education for Stronger Growth," Report informs.
The bank's expectations for 2025 were also raised by 0.3 percentage points to 2.7%, while the forecast for 2026 remained unchanged at 2.4%.
According to the bank's estimates, the South Caucasus economy will grow by 4.6% in 2024, which will be the fastest growth rate among ECA subregions, with an improvement of 1.1 percentage points compared to previous forecasts.
In 2025, growth is expected to be 3.7% (0.2 percentage points higher than the June forecast), while the forecast for 2026 remains at 3.4%.
"In the South Caucasus, growth is estimated at 4.6 percent in 2024, the fastest pace of expansion among all ECA subregions, with a 1.1 percentage point improvement from the June forecast. In Azerbaijan, growth is likely to be substantially stronger than in 2023 because of large public investment. In Armenia and Georgia, growth is expected to remain well above the potential level, driven by household consumption, investment, and government spending. However, in Armenia, growth is expected to ease to 5.5 percent this year, from 8.3 percent in 2023, partly because of the normalization of migration, tourist arrivals, and remittance inflows from the Russian Federation," reads the report.
"Growth in Europe and Central Asia (ECA) is likely to moderate to 3.3 percent this year, from 3.5 percent in 2023, in 2025 to 2.6% and in 2026 to 2.7%. However, the current forecast for 2024 is 0.3 percentage points higher than the June estimates due to robust domestic demand in a number of countries. This level of growth is significantly weaker than the 4.1 percent average growth in 2000–19 and well below the level needed for the region’s middle-income countries to achieve their aspiration to reach high-income status," reads the report.
Excluding Poland, Russia, and Türkiye - the three biggest economies in the region accounting for about 75% of ECA's GDP - growth is projected at 3.4% in 2024, which is lower than 3.7% in 2023. The main drivers of economic growth in ECA remain higher private consumption and supportive fiscal policy. The strengthening of consumption is associated with growth in real wages, sustainable social benefits, and active lending. Government spending is increasing due to higher public sector wages, social support, and increased investment in infrastructure and defense. The World Bank believes that external conditions for growth remain less favorable due to weak economic recovery among major trading partners, especially in the EU.
The recovery of exports has slowed down, especially in countries dependent on European production chains, such as Central Europe and the Western Balkans. Nevertheless, tourism growth remains significant: the number of international tourists in the ECA region in 2023 exceeded pre-pandemic levels and continues to grow in 2024. Türkiye received 30% more tourists in the first half of 2024 compared to the average in 2018-2019. Central Europe and the Western Balkans are also seeing an increase in tourist flow up to 80% in Albania and 15% in Bulgaria compared to the pre-pandemic period, reads the report.