EBRD raises Azerbaijan GDP growth forecast for 2025–2026

The European Bank for Reconstruction and Development (EBRD) expects Azerbaijan's economy to grow by 3% in 2025 and 2.5% in 2026, reads the February issue of the EBRD's Regional Economic Prospects update, Report informs.

Compared to September forecasts, growth estimates have been revised upward by 0.3 percentage points.

The EBRD notes that Azerbaijan's economy remains sensitive to fluctuations in oil and gas prices, as well as to geopolitical tensions in the region.

"In the medium term, trade along the Middle Corridor connecting China to Europe could create opportunities for Azerbaijan’s transport and logistics sectors, while public consumption is expected to benefit from government investments in infrastructure, agriculture, and defense," reads the update.

"The economy grew strongly in 2024, driven by the non-oil sector and public investment. Real GDP expanded by 4.1 percent in 2024, up from 1.1 percent in 2023, with non-oil growth reaching 6.2 percent, compared with 3.7 percent in 2023. Economic activity was supported by rising real incomes and infrastructure investment, while the oil and gas sector returned to growth in March 2024, as gas production expanded to meet European demand. Meanwhile, inflation remained contained, fluctuating between 0 percent year on year in April 2024 (the lowest level in more than nine years) and 4.9 percent at year-end. State price regulation and lower global food prices helped stabilize domestic food-price inflation.

The Central Bank of Azerbaijan (CBAR) responded to easing inflation pressures in late 2023 by reducing the key policy rate cumulatively by 175 basis points, from 9 percent in November 2023 to 7.25 percent by May 2024, and has maintained it at this level since then. Recognizing the need for additional measures to manage robust credit growth, which surpassed 20 percent in 2024, the CBA announced the activation of a 0.5 percent countercyclical capital buffer, effective from March 2025."