Dutch financial giant ING Group projects Azerbaijan’s economy to grow by 1.5% in 2025 and 2.8% in 2026, reflecting a modest but steady trajectory amid global uncertainty.
According to ING’s latest forecast, the country’s nominal GDP is expected to reach $79.6 billion this year and rise to $81.3 billion in 2026, supported by strong state assets and prudent fiscal policy.
Compared to earlier projections, ING revised down its 2025 growth estimate by 0.8 percentage points, while slightly improving its 2026 outlook by 0.3 points. The bank now sees Azerbaijan’s average annual GDP growth at around 2.15% for the two-year period.
“We are lowering short-term forecasts for GDP, budget balance, external position, and inflation based on data from the first half of 2025,” the report said. “Despite slower momentum, Azerbaijan’s financial position remains robust thanks to substantial public assets and disciplined budget management.”
ING analysts note that while GDP growth slowed sharply after a 4.1% expansion in 2024, the deceleration was broader than expected – with both the oil and non-oil sectors, including transport and construction, facing early-year pressure.
Preliminary government data for July–August also pointed to further loss of momentum, especially in industry and services. “In the long run, the energy sector remains the key drag on growth, while non-oil industries continue to show resilience,” ING added.
Still, the bank highlighted positive fundamentals on the consumer side, driven by real wage growth and stable employment, Report informs.
“Household spending increasingly relies on income rather than borrowing, reducing debt buildup and signaling a healthier pattern of consumption,” ING said.
Inflation Outlook and Monetary Policy
ING expects average inflation in Azerbaijan at 5.1% in 2025 and 5.8% in 2026.
The bank said inflationary pressures have eased since spring, with the consumer price index dropping to 4.9% in August, down from a 6.3% peak in April–May.
However, food and demand-side pressures remain strong.
“We see limited room for further rate cuts by the Central Bank, given persistent dollarization and ongoing fiscal stimulus,” the report said.
In July, the Central Bank of Azerbaijan reduced its key policy rate by 25 basis points to 7%, citing improved inflation dynamics. The regulator maintains a medium-term target of 4% ±2% annual inflation.
Market Confidence and Sovereign Bonds
Azerbaijani sovereign bonds remain in favor among investors following Moody’s upgrade of the country’s credit rating to Baa3, granting investment-grade status for the first time.
ING noted that spreads on Azerbaijan’s Eurobonds have narrowed in line with the new rating but continue to offer yields above peers such as Oman, Morocco, and Kazakhstan – making them attractive in a tight supply market.
“Peace initiatives between Azerbaijan and Armenia have also improved regional stability and investor sentiment,” ING said, adding that the country’s fundamentals remain strong despite the softening of its “twin surpluses” – fiscal and current account balances.
Comparative Forecasts
| Institution | 2025 GDP Growth | 2026 GDP Growth |
|---|---|---|
| ING Group | 1.5% | 2.8% |
| Ministry of Economy (Azerbaijan) | 3.0% | 2.9% |
| S&P Global | 2.0% | 2.0% |
| Fitch Ratings | 3.5% | 2.5% |
| Moody’s | 2.5% | 2.5% |
| IMF | 3.5% | 2.5% |
| EBRD | 3.0% | 2.5% |
| ADB | 2.4% | 2.0% |
| World Bank | 2.6% | 2.4% |
Context
Azerbaijan’s economy expanded by 4.1% in 2024, but only 1% in January–August 2025.
According to ING, recovery potential exists if external conditions improve and public investment accelerates in 2026.
The report concludes that while the short-term outlook remains subdued, strong fiscal buffers, investment-grade status, and gradual diversification continue to anchor Azerbaijan’s macroeconomic stability.
