The European Bank for Reconstruction and Development (EBRD) forecasts Azerbaijan’s economy to grow by 3% in 2025 and 2.5% in 2026, reads the May issue of the EBRD’s Regional Economic Prospects update, Report informs.
The forecasts remain at the level of February estimates. The development of the non-oil sector and continued public investment will remain the main growth drivers this year. However, the bank emphasizes the high sensitivity of the economy to fluctuations in oil and gas prices, a decrease in external demand, uncertainty in trade policy and possible disruptions in regional normalization processes. According to the update, in 2024, Azerbaijan’s economic growth accelerated due to the active development of the non-oil sectors and large-scale public investment.
Real GDP grew by 4.1% compared to 1.4% in 2023. Growth in the non-oil part of the economy amounted to 6.2% against 3.7% a year earlier, which was due to the revival in construction, ICT, transport and tourism. According to the EBRD, economic activity was supported by the growth of real incomes of the population and large-scale investment in infrastructure. Since March 2024, the oil and gas sector has also resumed growth amid an increase in gas production for supplies to Europe.
“In the first quarter of 2025, real GDP grew by just 0.3 percent year on year, compared with 4 percent in the same period of 2024, as weaker oil and gas sector output offset solid momentum in the non-oil sector. Meanwhile, inflation remained contained, fluctuating between 0 percent year on year in April 2024 (the lowest level in more than nine years) and 5.9 percent in March 2025. The recent acceleration was driven by food and services prices, but inflation remains within the target range of the Central Bank of Azerbaijan (CBAR) of 4 percent (±2 percent).
The CBAR responded to easing inflation pressures in late 2023 by reducing the key policy rate cumulatively by 175 basis points, from 9 percent in November 2023 to 7.25 percent by May 2024, and has maintained it at this level since then,” reads the update.
“In eastern Europe and the Caucasus, growth slowed from 4.5 percent in 2023 to 3.9 percent in 2024 as the boost from intermediated trade and inflows of labour and capital to the economies of the Caucasus waned. Growth is expected to moderate further to 3.5 percent in 2025 before picking up to 4.3 percent in 2026.”
According to the forecast of Azerbaijan’s Economy Ministry, GDP growth is expected at 3.7% in 2025 and 3.2% in 2026. Forecasts of international rating agencies vary. S&P Global expects growth at 2% per year, Fitch Ratings – 3% in 2025 and 2.4% in 2026, Moody’s – 2.5% annually.
The International Monetary Fund 3.5% and 2.5%, respectively, and the World Bank expects economic growth at 2.6% in 2025, and 2.4% in 2026. The Asian Development Bank forecasts 3.4% and 3.3%, respectively, the Dutch ING Group expects GDP growth rates at 2.5% in 2025 and 2.5% in 2026.
