Asian Development Bank lowers Azerbaijan GDP growth forecast for 2026 to 1.6%

BAKU. Sept 23 (Interfax) - The Asian Development Bank (ADB) forecasts that Azerbaijan's GDP will grow 1.6% this year, the bank said in the September edition of its Asian Development Outlook, published on its website.

In July, the ADB predicted that the country's economy would grow 2%.

The bank kept its Azerbaijan GDP growth forecast at 1.8% for 2027.

"Economic growth slowed in the first half of 2026 as hydrocarbons declined and non-hydrocarbons weakened. It fell to 0.8% in the first 6 months-from 1.5% in the first half of 2025-as the hydrocarbon sector contracted by 0.7% while the rest of the economy expanded by 1.5% [...] With slower growth expected to continue through the end of the year, this report lowers the growth forecast for 2026 but maintains the 2027 forecast amid anticipated economic recovery," the bank wrote.

The ADB forecast average annual inflation in Azerbaijan at 5.9% for 2026, versus 5.7% in the July forecast, and 5% for 2027, versus the previous 4.9%.

It also said that demand had contracted in H1 2026, causing inflation to decrease to 5.7%, versus 5.9% in January-June 2025. In the second half, the bank expects inflation to accelerate somewhat in Azerbaijan as hydrocarbon prices have an impact on the country's economy.

"In response to rising inflation expectations, the central bank paused its monetary easing cycle and raised its inflation forecast. With higher inflation expected in the second half of 2026, ADB has raised its projections for 2026 and 2027," the report says.

The bank also said that high hydrocarbon prices had led to a current account surplus of $1.7 billion or 9.5% of GDP for Azerbaijan in the first quarter of 2026, versus 6.5% of GDP in Q1 2025. In H1 2026, forex reserves increased by $0.6 billion to $85.8 billion, which was 119% of GDP, and now exceed Azerbaijan's external debt 19-fold.

Azerbaijan's economy grew 1.4% in 2025, with inflation at 5.6%. The country's Economy Ministry predicts GDP growth of 1.7% in 2026 and 2.7% in 2027, and average annual inflation at 5.7% and 5.3% respectively.