- Economic growth moderated to 1.4 percent in 2025, coming off elevated growth in 2024. Sustained fiscal consolidation and private sector-led diversification away from hydrocarbon production remain the key policy priorities, given declining hydrocarbon reserves.
- Staying on course with fiscal consolidation, continuing efforts to strengthen the monetary policy framework, and completing the implementation of the Financial Sector Assessment Program recommendations will enhance medium-term domestic and external stability.
- Azerbaijan is appropriately focused on diversification. These efforts would benefit from further tackling labor market informality, boosting labor productivity, deepening financial markets, improving SOE efficiency, and reducing the state footprint in the economy.
Washington, DC: An International Monetary Fund (IMF) mission led by Ms. Anna Bordon visited Baku during February 4-17, 2026. The purpose of the visit was to review the country's economic landscape, including its financial developments, economic outlook, risks, and policies aimed at promoting sustainable growth. The mission met with senior government officials, representatives of the financial sectors, and international financial institutions. At the end of the visit, Ms. Bordon issued the following statement:
"Growth moderated, while inflation picked up in 2025. Hydrocarbon output declined considerably last year, and growth in the nonhydrocarbon sector slowed amid the indirect effects of falling hydrocarbon prices and the normalization of investment from high levels. Overall, real GDP slowed to 1.4 percent, down from 4.2 percent in 2024. Largely driven by external factors, inflation rose temporarily above the upper bound of the CBA's inflation target range, before returning within the band in the second half of 2025. Credit growth slowed considerably in 2025, while banks continue to be well capitalized and profitable. The combined CBA and SOFAZ reserves increased from $70 billion at end-2024 to $85 billion by end-2025.
"Looking ahead, GDP is expected to grow at 2.1 percent in 2026, amid continued weakness in oil and gas production and some acceleration of non-oil GDP growth, before moderating to 2 ½ percent in the medium term. Inflation is projected to fall to 5.0 percent by end-2026 and to 4.0 percent by end-2027, assuming the unwinding of external inflationary pressures and continued fiscal consolidation. The external position is expected to weaken, with shrinking trade surpluses due to declining oil production. However, the current account balance is still projected to remain positive in 2026-27. The combined CBA and SOFAZ reserves will continue to grow but at a slower pace. Risks to the outlook remain broadly balanced, but external uncertainty is high
"The medium-term fiscal consolidation is appropriate and will ensure intergenerational equity and support external sustainability. A clear and comprehensive strategy based on identifying concrete revenue and expenditure measures will enhance the credibility of fiscal consolidation. Efforts to improve SOE profitability and reduce their subsidies, rationalize tax incentives, and strengthen tax administration and compliance should continue.
"While inflation is projected to fall, close monitoring of risks to inflation and responding to inflation surprises will be important, given elevated external uncertainty and still developing monetary policy passthrough. The interbank market rates remain close to the policy rate, reflecting successful management of excess liquidity by the CBA. Material improvement in the passthrough to the broader economy will require further development of a risk-free yield curve, and continuing progress in addressing long-standing structural issues such as dollarization, high operating costs, and low competition in the banking sector.
"Maintaining the current countercyclical capital buffer calibration is appropriate, given the slowdown in credit growth, while the implementation of the liquidity coverage ratio and the planned introduction of the net stable funding ratio will support the resilience of the banking sector. The recent adoption of risk-based supervision will strengthen prudential oversight and, along with the gradual adoption of Basel III and the ongoing enhancements to the financial safety net, will strengthen financial stability and further increase the public confidence in the banking sector.
"Azerbaijan is appropriately focused on economic diversification. Expanding the role of the private sector in diversification, including through foreign direct investments, calls for deepening capital markets to increase the private sector's access to finance, increasing labor productivity through human capital investment, and continuing reforms aimed at tackling labor market informality. Along with recent progress in monitoring of SOE performance, reducing the role of regulated prices and lowering state subsidies to SOEs would stimulate competition and help optimize SOE performance.
"The IMF team is grateful to the authorities and other stakeholders for their warm hospitality and insightful and candid discussions.
Azerbaijan: Selected Economic and Financial Indicators, 2023–31
Est. |
Projections |
||||||||
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
|
(Annual percentage change, unless otherwise specified) |
|||||||||
National Income |
|||||||||
GDP at constant prices |
1.4 |
4.2 |
1.4 |
2.1 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
Of which: Oil sector 1/ |
-2.5 |
0.1 |
-1.6 |
-2.0 |
-0.5 |
-0.5 |
-0.5 |
-0.5 |
-0.5 |
Non-oil sector |
4.5 |
6.5 |
2.7 |
3.7 |
3.6 |
3.5 |
3.5 |
3.5 |
3.5 |
Consumer price index (period average) |
8.8 |
2.2 |
5.6 |
5.2 |
4.5 |
4.0 |
4.0 |
4.0 |
4.0 |
Consumer price index (end of period) |
2.2 |
4.9 |
5.2 |
5.0 |
4.0 |
4.0 |
4.0 |
4.0 |
4.0 |
Money and Credit |
|||||||||
Domestic credit, net |
25.3 |
-1.3 |
29.7 |
11.2 |
12.1 |
10.1 |
10.1 |
10.0 |
9.7 |
Of which: Credit to private sector |
14.8 |
15.9 |
8.7 |
8.9 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
Manat base money |
19.4 |
0.4 |
7.4 |
7.2 |
8.5 |
9.0 |
9.0 |
9.0 |
9.0 |
Manat broad money |
19.6 |
3.7 |
10.2 |
6.9 |
7.8 |
8.2 |
8.2 |
8.4 |
8.4 |
Total broad money |
5.3 |
3.2 |
7.2 |
6.2 |
7.1 |
7.1 |
7.1 |
7.1 |
7.1 |
External Sector |
|||||||||
Exports f.o.b. |
-30.8 |
-11.0 |
-3.7 |
-9.0 |
-4.8 |
-1.2 |
1.8 |
1.6 |
2.2 |
Of which: Oil sector |
-34.0 |
-12.3 |
-5.9 |
-12.0 |
-7.6 |
-4.1 |
-0.5 |
-1.3 |
-0.1 |
Imports f.o.b. |
21.4 |
4.7 |
2.9 |
3.4 |
3.4 |
3.6 |
4.3 |
5.1 |
5.4 |
Of which: Oil sector |
12.2 |
-13.3 |
3.4 |
2.5 |
1.0 |
2.2 |
2.6 |
3.0 |
3.0 |
Real effective exchange rate |
6.1 |
-1.7 |
-3.0 |
… |
… |
… |
… |
… |
… |
(In percent of GDP, unless otherwise specified) |
|||||||||
Gross Investment |
17.7 |
16.8 |
15.7 |
16.3 |
16.4 |
16.5 |
16.0 |
15.3 |
15.3 |
Consolidated government |
12.2 |
11.9 |
11.1 |
10.9 |
10.3 |
9.8 |
9.1 |
8.4 |
8.1 |
Private sector |
5.6 |
4.9 |
4.5 |
5.4 |
6.1 |
6.8 |
6.9 |
6.9 |
7.2 |
Of which: Oil sector |
-0.3 |
-0.3 |
-0.4 |
0.0 |
0.3 |
0.5 |
0.5 |
0.5 |
0.4 |
Gross National Savings |
29.2 |
23.0 |
21.0 |
18.3 |
16.8 |
16.3 |
15.8 |
14.9 |
14.6 |
Consolidated General Government Finances 2/ |
|||||||||
Total revenue and grants |
40.6 |
37.9 |
37.1 |
36.1 |
34.6 |
33.8 |
33.2 |
32.7 |
32.3 |
Total expenditure |
32.7 |
33.9 |
34.6 |
37.0 |
36.2 |
35.1 |
34.4 |
33.4 |
32.9 |
Current expenditure |
20.5 |
21.9 |
23.4 |
26.1 |
25.8 |
25.4 |
25.3 |
24.9 |
24.8 |
Net acquisition of non-financial assets |
12.2 |
11.9 |
11.1 |
10.9 |
10.3 |
9.8 |
9.1 |
8.4 |
8.1 |
Overall fiscal balance |
7.9 |
4.1 |
2.6 |
-0.9 |
-1.5 |
-1.3 |
-1.2 |
-0.7 |
-0.7 |
Non-oil primary balance, in percent of non-oil GDP |
-22.1 |
-20.5 |
-18.6 |
-18.2 |
-16.2 |
-14.2 |
-13.1 |
-11.4 |
-10.5 |
General government debt 3/ |
21.8 |
21.7 |
20.1 |
20.7 |
20.9 |
20.7 |
20.4 |
19.9 |
19.6 |
General government and government-guaranteed debt |
38.7 |
37.5 |
28.2 |
25.3 |
24.4 |
23.6 |
22.9 |
21.9 |
20.8 |
External Sector |
|||||||||
Current account (- deficit) |
11.5 |
6.3 |
5.4 |
2.1 |
0.4 |
-0.2 |
-0.2 |
-0.4 |
-0.7 |
Foreign direct investment (net) |
-2.9 |
-1.3 |
-1.5 |
-1.0 |
-0.4 |
-0.1 |
0.3 |
0.5 |
0.7 |
Memorandum Items: |
|||||||||
Gross official international reserves (in millions of U.S. dollars) |
11,613 |
10,959 |
11,515 |
10,688 |
9,709 |
8,904 |
8,754 |
8,599 |
8,103 |
in months of next year's non-oil imports f.o.b. |
6.1 |
7.1 |
7.3 |
6.6 |
5.8 |
5.2 |
4.9 |
4.6 |
4.0 |
Nominal GDP (in millions of manat) |
123,128 |
126,524 |
129,094 |
132,467 |
139,742 |
148,211 |
157,505 |
167,366 |
177,966 |
Nominal non-oil GDP (in millions of manat) |
78,990 |
86,241 |
92,307 |
100,700 |
109,020 |
117,394 |
126,363 |
136,017 |
146,409 |
Nominal GDP (in millions of U.S. dollars) |
72,429 |
74,426 |
75,938 |
77,922 |
82,201 |
87,183 |
92,650 |
98,451 |
104,686 |
Oil Fund Assets (in millions of U.S. dollars) |
56,070 |
60,031 |
73,542 |
74,458 |
75,040 |
75,516 |
76,212 |
77,180 |
78,357 |
Assumed oil price, WEO plus $2-$3 premium (in U.S. dollars per barrel) |
82.6 |
81.2 |
69.7 |
66.7 |
64.9 |
65.4 |
66.4 |
67.2 |
68.5 |
Assumed natural gas price, WEO plus a premium (in U.S. dollars per thousands of cubic meters) |
460.1 |
389.0 |
425.4 |
380.4 |
326.5 |
287.1 |
287.1 |
287.1 |
287.1 |
Exchange rate (manat/dollar, end of period) |
1.7 |
1.7 |
1.7 |
… |
… |
… |
… |
… |
… |
Sources: National authorities; and IMF staff estimates and projections. |
|||||||||
1/ Includes the production and processing of oil and gas. |
|||||||||
2/ Consolidates State Budget, State Oil Fund of Azerbaijan (SOFAZ), Nakhchivan Autonomous Region (NAK) and State Social Protection Fund. |
|||||||||
3/ Starting in 2021, includes guarantees issued to Aqrakredit for its acquisition of distressed assets from the IBA. |
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