EBRD maintains economic outlook for Azerbaijan despite recent contraction

The European Bank for Reconstruction and Development has maintained its forecast for Azerbaijan’s economic growth at 2% for this year. 

This figure was published in the bank’s latest Regional Economic Prospects report, as Caliber.Az reports.

Another number that the EBRD left unchanged is its projection for 2027, with the forecasted growth for the gross domestic product (GDP) remaining at 2.5%.

According to the bank, Azerbaijan’s economic growth slowed to 1.4% last year. In the first quarter of 2026, GDP contracted by 0.3%, reflecting a 1.2% decline in the oil and gas sector, while growth in the non-oil economy eased to 0.2%.

The EBRD believes that GDP growth is expected to accelerate to 2% in 2026 and 2.5% in 2027 following weak economic performance at the beginning of the year. Their report further noted, that the outlook remains heavily dependent on hydrocarbon prices and production levels.

The bank added that higher global energy prices driven by tensions in the Middle East could generate windfall revenues for Azerbaijan, supporting public spending and investment and helping offset potential negative spillover effects from the conflict.

The EBRD also pointed to regional connectivity and trade initiatives linked to US-facilitated peace efforts between Azerbaijan and Armenia, as well as ongoing large-scale investments in renewable energy, as factors that could support economic growth and diversification over the medium term.

According to the report, annual inflation stood at 5.7% at the end of the first quarter, approaching the upper limit of the target range set by the Central Bank of Azerbaijan (CBAR).

The European bank noted that Azerbaijan’s current account surplus declined from 6.3% of GDP to 4.6% of GDP. Despite this, combined reserves held by CBAR and the country's sovereign wealth fund, the State Oil Fund of Azerbaijan (SOFAZ), continued to grow, reaching 112% of GDP.

Forecasts made by Azerbaijan’s Economy Ministry slightly divert from the EBRD's numbers, with GDP growth rate forecasted to reach 1.7% in 2026 and 3.3% in 2027. 

By Nazrin Sadigova