IMF Executive Board Concludes 2025 Article IV Consultation with the Republic of Azerbaijan
IMF News, April 22, 2025
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- Published: April 22, 2025
Summary of main findings
- On March 21, 2025, the IMF Executive Board concluded the Article IV consultation with Azerbaijan and endorsed the staff appraisal and the 2024 Financial System Stability Assessment.
- Real GDP increased by 4.1 percent in 2024, up from 1.4 percent in 2023, driven by strong growth in construction, communication, transportation, and hospitality.
- Hydrocarbon GDP declined by 2 percent in 2023 and stabilized in 2024, with moderate gas production expansion partially offsetting oil output declines.
- Inflation reached 4.9 percent at end-2024, within the Central Bank of Azerbaijan (CBA) target of 4 ±2 percent; inflation picked up in H2 2024 partly due to administered-price adjustments.
- The 2024 FSAP found the financial sector to be broadly resilient against severe shocks; the banking sector is well‑capitalized.
External and fiscal developments (2024)
- The decline in oil and gas prices reduced the 2024 external surplus; the current account surplus during the first three quarters of 2024 was about 50 percent lower than in the same period in 2023.
- Combined CBA and SOFAZ reserves reached about US$ 71 billion by end-2024, covering 41 months of next year’s imports.
- Non-oil primary deficit declined in 2024 to 20.5 percent on non-oil GDP, from 22.1 percent of non-oil GDP in 2023, reflecting strong non-oil tax revenues.
- Fiscal consolidation resumed following the large 2023 surplus.
Projections and outlook
- Growth is projected to slow to 3.5 percent in 2025, reflecting a slowdown in investment and flat hydrocarbon production.
- Medium-term growth is projected at 2 ½ percent, described as being in line with potential growth.
- Assuming broadly stable international food and energy prices, inflation is projected to remain within the CBA target of 4 ±2 percent.
- External position is projected to weaken in the medium term as hydrocarbon production declines, but FX reserves are expected to remain strong.
Risks to the outlook
- External uncertainty is high: reduced hydrocarbon prices from higher supply or lower demand could adversely affect growth, external position, and fiscal revenues.
- Geopolitical developments could push hydrocarbon prices higher temporarily or deepen geoeconomic fragmentation, affecting diversification.
- Domestic risks include pressures to increase budgetary spending, which could increase inflation, delay fiscal consolidation, and weaken fiscal rule credibility.
- Presence of inefficient SOEs could undermine private sector development and diversification.
Executive Board assessment and policy recommendations
- Directors agreed that growth has remained resilient and inflation is contained, but risks are broadly balanced and subject to significant uncertainty.
- Fiscal policy:
- Directors welcomed adherence to fiscal targets under the fiscal rule.
- They cautioned that the expansionary 2025 budget would be procyclical and broadly called on the authorities to continue fiscal adjustment in 2025.
- They recommended saving any revenue overperformance or expenditure shortfall to help contain inflationary pressures and reinforce fiscal sustainability.
- Urged fiscal consolidation over the medium term to ensure intergenerational equity, underpinned by revenue and expenditure measures and reforms to strengthen the fiscal rule framework.
- Noted the benefits of a potential TADAT and PIMA to support fiscal efforts.
- Monetary policy:
- Directors viewed the central bank’s current monetary policy stance as appropriate, given inflation within the target band and the recent increase appearing transitory.
- Emphasized the need to closely monitor inflation risks and be prepared to act swiftly if needed.
- Welcomed enhanced monetary policy transmission and called for continued improvements to prepare for a possible transition to a hybrid inflation targeting regime.
- Financial sector and supervision:
- Welcomed the 2024 FSAP finding that the financial system is broadly resilient and banking sector well‑capitalized.
- Encouraged continued progress on prudential oversight, the financial safety net, systemic risk analysis, and stress testing frameworks.
- Underscored importance of implementing consolidated supervision; developing early warning indicators and triggers for supervisory actions; reinforcing resilience of domestic systemically important banks; and strengthening the emergency liquidity assistance framework.
- Structural reforms and private sector:
- Emphasized need for private sector development to support diversification.
- Called for reforms to strengthen corporate governance in state‑owned enterprises and create a level playing field for the private sector.
- Urged continued efforts to improve governance, combat corruption, and further strengthen the AML/CFT framework.
- Encouraged intensifying efforts to increase private sector access to finance and contribute to the global climate agenda.
Selected key statistics and projections (as reported)
- Real GDP growth: 2022: 4.7; 2023: 1.4; 2024: 4.1; 2025: 3.5; medium term: 2 ½ percent.
- Oil sector (annual percent change): 2022: -2.4; 2023: -2.0; 2024: 0.3; 2025: 0.2.
- Non-oil sector (annual percent change): 2022: 9.1; 2023: 4.5; 2024: 6.2; 2025: 3.7.
- Consumer price index (end of period): 2022: 14.4; 2023: 2.1; 2024: 4.9; 2025: 5.2.
- Domestic credit, net (annual percent change): 2023: 14.7; 2024: 5.0; 2025: 6.9.
- Manat broad money (annual percent change): 2022: 23.8; 2023: 19.6; 2024: 10.6; 2025: 7.9.
- Exports f.o.b. (annual percent change): 2022: 94.6; 2023: -30.8; 2024: -8.8; 2025: 10.8.
- Imports f.o.b. (annual percent change): 2022: 29.7; 2023: 21.4; 2024: 2.7; 2025: 12.0.
- Gross investment (percent of GDP): 2022: 12.1; 2023: 18.3; 2024: 17.8; 2025: 16.2; 2026: 14.6.
- Gross national savings (percent of GDP): 2022: 42.1; 2023: 29.8; 2024: 25.7; 2025: 26.1.
- Consolidated general government: Total revenue and grants (percent of GDP): 2022: 32.1; 2023: 40.6; 2024: 37.1; 2025: 34.4.
- Total expenditure (percent of GDP): 2022: 26.2; 2023: 32.7; 2024: 33.8; 2025: 35.6.
- Overall fiscal balance (percent of GDP): 2022: 6.0; 2023: 3.2; 2024: -1.3; 2025: -1.7.
- Non-oil primary balance (percent of non-oil GDP): 2022: -22.4; 2023: -22.1; 2024: -20.5; 2025: -18.6.
- General government debt (percent of GDP): 2022: 17.3; 2023: 21.8; 2024: 20.9; 2025: 21.0.
- General government and government-guaranteed debt (percent of GDP): 2022: 26.9; 2023: 28.9; 2024: 27.6; 2025: 28.6.
- Current account (percent of GDP): 2022: 11.5; 2023: 7.8; 2024: 0.5; 2025: -3.3.
- Foreign direct investment (net, percent of GDP): 2022: -6.5; 2023: -2.9; 2024: -0.7; 2025: -0.4.
- Gross official international reserves (in millions of U.S. dollars): 2022: 8,996; 2023: 11,281; 2024: 10,960.
- Reserves coverage: combined CBA and SOFAZ reserves reported as about US$ 71 billion by end-2024, covering 41 months of next year’s imports.
- Nominal GDP (in millions of manat): 2022: 133,973; 2023: 123,128; 2024: 126,337; 2025: 134,078.
- Nominal GDP (in millions of U.S. dollars): 2022: 78,807; 2023: 72,429; 2024: 74,316; 2025: 78,870.
- Oil Fund Assets (in millions of U.S. dollars): 2022: 49,034; 2023: 56,070; 2024: 60,031; 2025: 60,911.
- Assumed oil price, WEO plus $2-$3 premium (in U.S. dollars per barrel): 2022: 98.4; 2023: 82.6; 2024: 81.2; 2025: 78.6.
- Assumed natural gas price, WEO plus a premium (in U.S. dollars per thousands of cubic meters): 2022: 1340.0; 2023: 460.1; 2024: 389.0; 2025: 517.4.
IMF Communications Department — April 22, 2025.