ADB Lowers Azerbaijan GDP Growth Forecast Amid Oil Decline

The Asian Development Bank lowered its 2026 GDP growth forecast for Azerbaijan from 2% to 1.6%, citing a decline in oil sector production. The bank projects a slight recovery to 1.8% growth in 2027, noting that the non-oil sector remains resilient despite the weakness in hydrocarbons.

Inflation projections have been revised upward, with the bank expecting average annual inflation to reach 5.9% in 2026 and 5% in 2027. These increases are driven by changes in administered tariffs and the pass-through of hydrocarbon prices to domestic costs. The Central Bank of the Republic of Azerbaijan also raised its forecasts, expecting inflation to hit 6.1% by the end of 2026 due to external cost pressures.

Despite growth concerns, Azerbaijan maintains a strong external position. The country recorded a current account surplus of $1.7 billion in the first quarter of 2026, and combined foreign exchange reserves rose to $85.8 billion by the first half of the year. Additionally, the positive money transfer balance grew 74.1% between January and August 2026, reaching $751 million.

In response to rising inflation expectations, the Central Bank of the Republic of Azerbaijan has halted its monetary policy easing phase. The Asian Development Bank expects interest rates to remain stable through 2026, though it suggests a slight increase could occur in 2027 due to balanced inflation risks and favorable currency conditions.