WB updates Azerbaijan's economic growth forecast for 2025

The World Bank (WB) forecasts economic growth in Azerbaijan at 2.6% in 2025 and 2.4% in 2026, Report informs referring to the WB update on economic prospects for the Europe and Central Asia region entitled "Accelerating Growth through Entrepreneurship, Technology Adoption, and Innovation."

Expectations for 2025 were lowered by 0.1 percentage points compared to the January forecast. The forecast for 2026 remained unchanged.

Thus, the World Bank estimates the average annual growth of the economy of Azerbaijan in 2025-2026 at 2.5%. For the countries of the Caucasus and Central Asia as a whole, the bank expects a slowdown in economic activity: after growth of 5.7% in 2024, a decline to 3.6% is projected in 2025, and to 3.4% in 2026.

"In the South Caucasus, growth is projected to average 3.5 percent in 2025–26, nearly 2 percentage points below the pace of last year’s expansion, as domestic demand, trade, and remittance inflows stabilize in Armenia and Georgia, and growth weakens in Azerbaijan amid declining oil production," reads the update.

"Some of last year’s fiscal weakness was due to one-off factors. In Armenia, the fiscal deficit widened to 3.5 percent of GDP because of increased social spending, including to support refugees. In Kazakhstan, flood relief and welfare programs, together with lower oil-related revenue,s contributed to a larger deficit. Azerbaijan’s budget surplus was cut in half, to 4.1 percent of GDP, due to lower oil sector revenues and rising reconstruction spending."

"Countries with higher money demand and better credit ratings—like those in Central Europe and Azerbaijan, Kazakhstan, and Serbia—have more fiscal space and can sustain larger debt," the WB added.

Meanwhile, the forecast of Azerbaijan's Economy Ministry is higher: GDP growth is expected at 3.7% in 2025 and 3.2% in 2026. Forecasts of international rating agencies vary. S&P Global expects growth at 2% per year, Fitch Ratings at 3% in 2025 and 2.4% in 2026, Moody's at 2.5% annually.

The European Bank for Reconstruction and Development forecasts economic growth at 3% in 2025 and 2.5% in 2026, and the International Monetary Fund at 3.5% and 2.5%, respectively. The World Bank expects economic growth at 2.7% in 2025, 2.4% in 2026, the Asian Development Bank forecasts 3.4% and 3.3%, respectively.

The Dutch ING Group expects GDP growth rates to be 3% in 2025 and 2.5% in 2026. In 2024, Azerbaijan's economy grew by 4.1%, while in the first quarter of 2025, the growth rate was only 0.3%.