Baku: The International Monetary Fund (IMF) has revised its economic growth forecast for Azerbaijan for 2025, increasing it by 1 percentage point to 3.5%.
According to Azeri-Press News Agency, the IMF had initially set its economic growth expectations at 2.5% in October 2024. However, the Fund anticipates a slowdown in economic growth in 2025 compared to the previous year. This projected deceleration is attributed to a decrease in oil and gas production and a slowdown in the growth of new investments in the economy. The IMF noted that by 2026, Azerbaijan’s economy will approach its potential production level, with an expected growth rate of 2.5% over the medium term.
A weakening external economic environment is anticipated over the medium term, characterized by a decline in hydrocarbon production and prices, a narrowing trade surplus, and weakening non-hydrocarbon exports. Despite these challenges, the IMF forecasts that foreign exchange reserves will remain strong. Inflation is expected to stay within the Central Bank’s target range of 4±2 percent, aided by stable international food and energy prices and ongoing fiscal protection measures.
In the non-oil sector, the economic growth forecast for 2025 is set at 4.5%, with a slight decrease to 3.7% in 2026, and stabilization at 3.5% from 2027 to 2029. The IMF has highlighted that the risks associated with these forecasts are generally balanced, but external uncertainty remains high. Fluctuations in oil and gas supply and demand, along with factors related to the energy transition or a global economic slowdown, could lead to a decrease in hydrocarbon prices, significantly affecting economic growth, the external environment, and fiscal revenues.
The impact of other risks is more uncertain, including potential intensification of conflicts which, if oil and gas prices increase, could improve Azerbaijan’s trade terms, while rising food prices could have the opposite effect. Additionally, deep fragmentation could impede efforts to develop and diversify the non-hydrocarbon sector, though it could also present opportunities if trade and investments are directed toward the region. Domestically, risks continue to arise from pro-cyclical fiscal policies and extreme weather events impacting agricultural production, food security, and inflation.