World Bank forecasts steady growth for Azerbaijan in 2025, 2026

The World Bank has projected a moderate economic growth rate for Azerbaijan, forecasting a 2.6 per cent growth in 2025 and 2.4 per cent in 2026.

This outlook is detailed in the World Bank's latest "Economic Outlook for Europe and Central Asia," titled "Accelerating Growth through Entrepreneurship, Technology, and Innovation", Caliber.Az reports via local media.

The forecast for 2025 has been slightly revised downward by 0.1 percentage point compared to earlier projections made in January, while the 2026 estimate remains unchanged. Consequently, the World Bank expects an average annual economic growth of approximately 2.5 per cent for Azerbaijan over the two-year period.

For the wider Caucasus and Central Asia region, the World Bank anticipates a slowdown in economic activity. After a growth of 5.7 per cent in 2024, the region is expected to experience a deceleration to 3.6 per cent in 2025 and 3.4 per cent in 2026. In the South Caucasus, including Azerbaijan, the average annual growth rate is projected at 3.5 per cent for 2025-2026—nearly two percentage points lower than the previous year's growth rate. 

This slowdown is attributed to factors such as the stabilisation of domestic demand, trade, and remittances in Armenia and Georgia, coupled with slower growth in Azerbaijan due to declining oil production. The fiscal situation across the region also saw challenges in 2024. In Armenia, the budget deficit widened to 3.5 per cent of GDP due to increased social expenditures. Kazakhstan’s fiscal deficit grew as well, driven by flood recovery costs, social programs, and a drop in oil revenues. 

In Azerbaijan, the budget surplus halved to 4.1 per cent of GDP, as a result of decreased oil revenues and increased spending on reconstruction in the country’s recently liberated territories. The report also highlights that countries with more developed financial markets, such as Azerbaijan, Kazakhstan, and Serbia, have greater fiscal space due to higher credit ratings and the ability to secure additional borrowing without negatively impacting private investments. Meanwhile, Azerbaijan’s Ministry of Economy has a more optimistic forecast. 

The ministry expects GDP growth of 3.7 per cent in 2025 and 3.2 per cent in 2026. International rating agencies have presented varying forecasts. S&P Global anticipates annual growth of 2 per cent, Fitch Ratings projects 3 per cent growth in 2025 and 2.4 per cent in 2026, and Moody’s predicts steady growth of 2.5 per cent annually. The European Bank for Reconstruction and Development forecasts 3 per cent growth in 2025 and 2.5 per cent in 2026, while the International Monetary Fund expects 3.5 per cent and 2.5 per cent, respectively. 

The Asian Development Bank anticipates growth of 3.4 per cent in 2025 and 3.3 per cent in 2026, and ING Group forecasts 3 per cent growth in 2025 and 2.5 per cent in 2026. Azerbaijan’s economy grew by 4.1 per cent in 2024, but growth in the first quarter of 2025 slowed significantly to just 0.3 per cent, signaling a challenging year ahead.

By Naila Huseynova