World Bank Lowers Azerbaijan 2026 Growth Forecast to 1.2%

The World Bank lowered Azerbaijan's 2026 GDP growth forecast to 1.2%, down from 1.4% in 2025. This slowdown stems from a structural decline in the oil sector and weaker-than-expected non-oil growth caused by cuts to government capital spending. The bank projects a recovery to 1.8% in 2027 and 1.9% in 2028, driven by the non-oil economy. These figures align closely with the Central Bank of Azerbaijan's May forecast of 1.1% growth for 2026, though the national bank expects a sharper acceleration to 3.2% in 2027.

Speaking at the Fitch on Azerbaijan 2026 conference in Baku, World Bank Senior Economist Steve Loris Gui-Diby described Azerbaijan's fiscal position as favorable, citing low public debt and strong international reserves. However, he warned that high inflation is pressuring purchasing power and that reliance on imported equipment makes the country susceptible to external price shocks.

Gui-Diby urged Azerbaijan to deepen structural reforms to reduce its dependence on hydrocarbons. He advocated for a growth model based on investment, infusion, and innovation, suggesting the country shift its focus from major infrastructure projects toward the infusion of knowledge and technology. To attract foreign direct investment, he recommended simplifying investment procedures and removing market entry barriers to strengthen the private sector.