FitchRatings sees 2.2% growth for Azerbaijan economy in 2026

International agency Fitch Ratings expects Azerbaijan’s economy to grow by 2.2% in 2026, up from 1.4% in 2025, linking the projection to a decline in oil production volumes and stabilisation in gas output.

Analysts also assessed the risk of direct disruptions to energy supply systems as limited, Caliber.Az reports, citing the FitchRatings.

The analysis took into account the economic consequences of military developments in Iran for South Caucasus countries.

“Georgia receives the bulk of its gas from Azerbaijan (BBB-/Stable), whose oil and gas infrastructure is not under immediate threat. Armenia has a long-term contract with Russia’s Gazprom for gas supplies at fixed tariffs,” the experts said.

They noted that pressure on exchange rates also remains moderate: the Georgian lari and Armenian dram have broadly remained stable against the US dollar during the first month of the war.

However, government sources forecast that Azerbaijan’s economic growth rate is expected to reach 1.7% in 2026.

Overall, Fitch says the conflict in Iran creates challenges for South Caucasus sovereign economic policy mainly through higher energy and logistics costs rather than direct spillover of hostilities.

“A prolonged shock will increase inflation risks and lead to a wider external deficit, primarily in Armenia (BB+/Positive) and Georgia (BB/Stable), both net importers of energy resources. At the same time, significant international reserves, limited (so far) pressure on exchange rates, and generally reliable energy supplies limit short-term risks to sovereign ratings,” the agency stated.

Fitch also expects regulators to take countermeasures in the event of secondary inflationary effects, currency depreciation, or destabilisation of inflation expectations.

“Rising global energy prices will affect transport costs, utility tariffs and food prices, potentially accelerating inflation from currently moderate levels. Additional pressure may arise from higher prices for fertilisers and other imported inputs,” it emphasised.

According to the assessment, at the same time, real interest rates in the region remain in positive territory, giving central banks some room to manoeuvre to contain broader inflationary effects in the event of a prolonged shock.

In experts’ view, external accounts represent the most obvious vulnerability.

Fitch estimates that Georgia’s current account deficit will widen to 5.3% of GDP in 2026.

Armenia’s deficit is also projected to reach 5% of GDP this year, following a seven-year high of 7.2% recorded in 2025.

By Bakhtiyar Abbasov