Fitch Ratings: Rising energy prices set to boost Azerbaijan’s growth, budget surpluses

Rising global oil and gas prices are expected to strengthen Azerbaijan’s economic outlook, improving public finances and supporting faster growth in 2026, according to a new report by Fitch Ratings.

The agency said higher hydrocarbon prices — driven in part by ongoing instability in the Middle East — are likely to reinforce the country’s “twin surpluses,” referring to both its current account and fiscal balance. Under Fitch’s baseline scenario, Azerbaijan’s current account surplus is projected to hold at 4.5% of GDP in 2026, while the consolidated budget surplus is expected to reach 2.1% of GDP, despite a forecast decline in returns from the State Oil Fund, Caliber.Az reports per local media.

Analysts also expect economic growth to accelerate again next year, supported by stronger export revenues.

However, the report highlights the continued sensitivity of Azerbaijan’s economy to oil price fluctuations. The share of the non-oil sector remains volatile and has declined significantly in recent years, falling by 9 percentage points from a peak of 63.5% in 2015 as oil prices surged to a 14-year high in 2022.

Fitch noted a gradual increase in the contribution of the services sector, particularly information and communication technologies and tourism, which together added 0.2 percentage points to growth in 2025.

The country’s strategic location has also enhanced its role as a regional transit hub. Positioned along the Caspian Sea and a key segment of the so-called Middle Corridor trade route, Azerbaijan has seen land freight volumes more than double since the start of the war in Ukraine. Between 2022 and 2024, freight transport accounted for an average of 27% of service exports, with its share of GDP rising to 2.3%.

The report further points to a notable increase in non-oil budget revenues, which made up roughly half of total revenues — equivalent to 13% of GDP — between 2022 and 2025.

Looking ahead, Fitch emphasised that meeting the government’s fiscal targets will require sustained reforms. Under current fiscal rules, the non-oil budget deficit must fall below 13% of non-oil GDP by 2029, down from 20.4% in 2024. Achieving this goal, the agency said, will depend on expanding non-oil revenues and strengthening institutional frameworks, including tighter oversight and clearer fiscal benchmarks.

By Sabina Mammadli