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World Bank presented its first periodic Country Economic Review for Azerbaijan

29 October 2025 13:07 (UTC +04:00)

Today, the World Bank presented its first periodic Country Economic Review for Azerbaijan, APA-Economics reports.

The report provides detailed information on the country’s macroeconomic indicators and prospects.

The Azerbaijan Country Economic Review (ACER) is a biannual report that covers recent economic developments and prospects in the country. Each report will consist of two parts: the first part will analyze recent economic trends and discuss medium-term prospects and risks, and the second part will examine specific policy issues in depth.

Azerbaijan has demonstrated significant resilience to global and regional shocks over the past decade. The adoption of the Competition Code, significant tax reforms, simplification of licensing and permit procedures, transparency in labor relations, and other steps taken to address challenges in the business environment have played an important role in supporting entrepreneurial activity.

The economic reforms implemented in the country, its strategic location in the South Caucasus, and its abundant energy resources have ensured strong economic growth and a significant reduction in poverty. The government’s focus on macroeconomic stability has enabled the country to weather the volatility — including the 2015 oil price shock and the COVID-19 pandemic — and maintain fiscal and foreign trade surpluses, low public debt, and substantial macroeconomic reserves.

The latest analysis shows that while the oil and gas sector contracted by 3.2% in the first half of 2025, non-oil growth was 3.9%. Activity in construction, transport, ICT, and retail trade returned to normal. Agriculture and tourism maintained their growth momentum.

Inflation eased slightly toward the end of June as domestic and external pressures eased, with annual inflation falling to 4.8%, close to the midpoint of the Central Bank of Azerbaijan’s target range (4 ± 2%).

The external and fiscal balances are in sizeable surpluses, although the decline in oil and gas revenues has dampened these indicators somewhat. Macroeconomic buffers remain strong: State Oil Fund (SOFAZ) reserves increased by 13.2% to $65 billion (88% of GDP), while Central Bank of Azerbaijan (CBA) reserves increased to $11.5 billion, equivalent to 5.6 months of imports.

Looking ahead, economic growth is projected to average 1.7% between 2025 and 2027. This is due to a tightening of fiscal policy in the context of lower oil prices. Inflation is expected to remain within the Central Bank’s target range. Risks include prolonged low growth and a sharper decline in energy prices. While there are sufficient buffers against short-term risks, long-term sustainability will depend on the success of efforts to diversify the economy through structural reforms.

A special focus of this issue is non-oil sector investment and the issues affecting its growth. Investment levels have been around 20% of GDP in recent years. This is largely due to a decline in public investment amid declining oil and gas revenues. Domestic private investment is concentrated in inward-oriented sectors, such as construction.
The report highlights the importance of structural reforms to harness the potential of the private sector. These reforms could include increasing policy stability, improving the level playing field, expanding access to finance, and strengthening the judiciary.

This first Country Economic Review aims to inform policy debates, support evidence-based decision-making, and promote dialogue among various stakeholders on ways to create jobs and increase productivity.