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Azerbaijan develops index to forecast food inflation two months ahead

03 September 2026 12:25 (UTC +04:00)

Changes in the prices of imported food products in Azerbaijan have been found to precede food inflation in the domestic market by approximately two months, APA-Economics reports.

This conclusion is reflected in a research paper titled “Construction and Forecasting of the Imported Food Price Index in Azerbaijan,” prepared by employees of the Central Bank of Azerbaijan, Tamkin Nuriyev, Aygun Garayeva, and Gulzar Tahirova.

As part of the study, data from approximately 800,000 customs transactions covering the period from January 2018 to February 2026 were analyzed. Based on these data, the Imported Food Price Index (IFPI) was developed, covering 34 food products included in the consumer basket and significantly dependent on imports.

According to the results of the study, the highest correlation between the new index and the official food consumer price index was recorded at 0.81, with a two-month lag. In other words, changes in import prices are reflected more clearly in retail food prices approximately two months later.

The study notes that customs data are released on average 20–25 days after the reporting month, while official food inflation figures are published 10–15 days after the end of the month. Taking this difference into account, the new index provides an information advantage of approximately six to seven weeks over the official food price indicator. This could allow inflationary pressures to be identified earlier.

The study also developed a model for forecasting imported food prices using machine learning methods. The model achieved an average directional accuracy of 72.22%, while its average forecasting advantage over the random walk model stood at 58.1%.

According to the authors, incorporating the Imported Food Price Index into the Central Bank’s broader inflation forecasting models could improve the accuracy of short-term food inflation forecasts.

Note that food products account for approximately 43% of Azerbaijan’s consumer basket. The authors of the study state that because a significant share of food consumption in the country depends on imports, domestic prices are sensitive to international commodity prices and global supply shocks.