Azerbaijan’s inflation set to ease as IMF signals long-term stability

By the end of 2026, annual inflation in Azerbaijan is projected to ease to 5% from 5.2% at the end of 2025, with further moderation to 4% expected by 2027, provided external inflationary pressures subside and budgetary consolidation continues, the International Monetary Fund (IMF) said.

As Caliber.Az reports via local media, Anna Bordon, Head of the IMF mission to Azerbaijan, shared the outlook following the mission’s visit to Baku from February 4 to 17, 2026. The IMF expects annual inflation to remain around 4% through 2032.

Medium-term inflation forecasts indicate 5.2% in 2026 (down from 5.6% in 2025), 4.5% in 2027, and roughly 4% in the following years up to 2032.

Bordon highlighted the role of external factors in driving inflation above the upper bound of the Central Bank of Azerbaijan’s (CBA) target range in early 2025, before returning to the target range in the second half of the year. “Although inflation is projected to decline, careful monitoring of inflationary risks and responses to unexpected changes will be important, given heightened external uncertainty and the still-developing transmission mechanism of monetary policy,” she said.

On monetary policy, Bordon noted that interbank market rates remain close to the policy rate, reflecting successful management of excess liquidity by the CBA.

She also stressed that “significant improvement in transmission to the broader economy will require further development of the risk-free yield curve and continued progress in addressing long-standing structural issues, such as dollarization, high operating costs, and low competition in the banking sector.”

By Vafa Guliyeva