Fitch predicts Azerbaijan's inflation below 5% for next decade

Fitch Solutions, a subsidiary of Fitch Ratings global credit rating agency, has predicted that Azerbaijan's average annual inflation is expected to remain below 5 per cent over the next decade.

Over the past decade, Azerbaijan's inflation rate has averaged 5.5 per cent. While consumer inflation remains elevated due to rising food prices and the disruptions caused by the Russia-Ukraine war, Fitch Solutions predicts a gradual easing of inflationary pressures in the coming years, Caliber.Az reports per local media.

The forecast suggests that inflation will continue to moderate, with projections of 4 per cent in 2025, rising slightly to 4.4 per cent in 2026, and reaching 4.7 per cent by 2027. However, from 2028 onward, inflation is expected to slow further, dropping to 4.4 per cent, then 2.7 per cent in 2029, and 1.7 per cent in 2030.

In the following years, inflation is projected to slow even further, reaching 1.6 per cent in 2031, 1.3 per cent in 2032, and 0.7 per cent in 2033, with a minimal 0.1 per cent in 2034. The Central Bank of Azerbaijan (CBA) has set an inflation target range of 4±2 per cent and continues to focus on maintaining price stability through its control of the exchange rate. Fitch Solutions also notes that despite the challenges posed by high dollarization in the country, which accounts for 48.4 per cent of bank deposits in foreign currency, the CBA is in a stronger position to manage inflation compared to the crisis of 2015.

Fitch Solutions also mentions that the CBA is working on a four-year transformation of its monetary policy, aiming to introduce inflation targeting by 2026, which could increase flexibility in the manat exchange rate. Azerbaijan's inflation rate was 2.2 per cent in 2024, with a jump to 5.4 per cent in January 2025.

By Naila Huseynova