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IMF: Economic growth in Azerbaijan will be 3.5% this year, 2.5% in 2026-2029

09 April 2025 13:31 (UTC +04:00)

The International Monetary Fund (IMF) has revised its economic growth forecast for Azerbaijan for 2025, increasing it by 1% point to 3.5%, APA-Economics reports citing IMF.

In October 2024, the Fund's economic growth expectations were 2.5%.

However, the IMF believes that economic growth will slow down in 2025 compared to the previous year.

The Fund attributes this to a decrease in oil and gas production and a slowdown in the growth dynamics of new investments in the economy. It was noted that in 2026, the economy will approach its potential production level. Over the medium term, the country’s economy is expected to grow by 2.5%: "A weakening of the external economic environment is expected over the medium term, with a decline in hydrocarbon production and prices narrowing of the trade surplus and weakening non-hydrocarbon exports, but foreign exchange reserves are forecasted to remain strong. Inflation is expected to remain within the Central Bank's target range of 4±2 percent over the medium term. This is due to the relatively stable international food and energy prices and the continuation of fiscal protection."

In the non-oil sector, the economic growth forecast for 2025 is 4.5%, for 2026 it is 3.7%, and for 2027-2029 it is set at 3.5%.

The IMF has emphasized that the risks associated with these forecasts are generally balanced, but external uncertainty remains high: "Fluctuations in oil and gas supply and demand, factors arising from the energy transition or global slowdown could lead to a decrease in hydrocarbon prices, which could significantly affect economic growth, the external environment, and fiscal revenues."

The impact of other risks is more uncertain: "An intensification of conflicts, if oil and gas prices increase, could improve Azerbaijan’s trade terms, while rising food prices could worsen them. Deep fragmentation could harm the efforts to develop and diversify the non-hydrocarbon sector, but if trade and investments are directed to the region, it could also create opportunities. Domestic risks continue to stem from pro-cyclical fiscal policies and extreme weather events affecting agricultural production, food security, and inflation."