Azerbaijan lowers growth forecast

The Central Bank of Azerbaijan has significantly lowered its forecast for GDP growth in 2026. Instead of the 2.4 percent expected in February, it is now forecasting growth of just 1.1 percent. At the same time, it has almost doubled its forecast for the current account surplus - from 2.8 to 3.0 billion US dollars to 5.5 billion US dollars. This was stated by the head of the central bank, Taleh Kazimov, on May 7. The lower growth forecast reflects the consequences of increased global uncertainty for trade and supply chains. At the same time, Azerbaijan is benefiting from higher prices for its commodity exports. However, the weaker momentum in the non-oil sector points to a slowdown in domestic demand. The central bank has not yet responded to this with a looser monetary policy, as inflation risks remain. Weaker growth outside the oil sector The central bank now expects the non-oil and gas sector to grow by 3.2% in 2026. In February, the forecast was still at 4.0%. For 2027, however, the CBA expects a slight improvement: overall GDP is expected to grow by 3.2 percent and the non-oil sector by 4.7 percent. The bank had previously expected 2.9 percent and 4.3 percent respectively. The different forecasts show a mixed picture: Azerbaijan is stronger than previously assumed in terms of foreign trade, while domestic economic momentum is weaker. Current account balance benefits from higher energy prices The improved current account forecast is primarily based on a strong foreign trade position. According to customs statistics, Azerbaijan achieved a trade surplus of USD 1.4 billion in the first quarter of 2026. This corresponds to an increase of 93.3 percent compared to the previous year. The central bank has also raised its forecast for 2027. It now expects a current account surplus of 4.4 billion US dollars, up from 2.7 to 2.8 billion US dollars previously. The new assumptions on oil and gas prices are significantly higher than the February estimates. The CBA now expects an average Brent price of 84.5 US dollars per barrel in 2026 and 78 US dollars in 2027, compared to its previous forecast of 65 US dollars for both years. For natural gas, the bank expects USD 324 per 1,000 cubic meters in 2026 and USD 290 in 2027, up from USD 269 and USD 254 respectively. Foreign exchange reserves rose by 10.2% to USD 12.7 billion in the first four months of the year. This was due to the surplus on the foreign exchange market and purchase interventions by the central bank in April. The post Azerbaijan lowers growth forecast appeared first on ostwirtschaft.de.