April 22, 2025
PRESS OFFICER: Mayada Ghazala
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Washington, DC: On March 21, 2025, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Azerbaijan and endorsed the staff appraisal, as well as the 2024 Financial System Stability Assessment.
Following a slowdown in 2023, growth accelerated, and inflation picked up. Real GDP increased by 4.1 percent in 2024, up from 1.4 percent in 2023, supported by strong growth in construction, communication, transportation, and hospitality sectors. After declining by 2 percent in 2023, hydrocarbon GDP stabilized in 2024, as moderate gas production expansion compensated for the decline in oil output. Inflation picked up in the second half of 2024, partly reflecting adjustment in administered prices, reaching 4.9 percent at the end of the year, still within the CBA target of 4 ±2 percent. The 2024 Financial Sector Assessment Program (FSAP) found the financial sector to be broadly resilient against severe shocks.
The decline in oil and gas prices reduced the 2024 external surplus, but fiscal consolidation resumed. After recording a surplus of 11.5 percent of GDP in 2023, the current account balance is projected to weaken in 2024. During the first three quarters of 2024, the current account surplus has been about 50 percent lower than in the same period last year. The combined CBA and SOFAZ reserves reached about US$ 71 billion by end-2024, covering 41 months of next year’s imports. After remaining broadly unchanged in 2023, the nonoil primary deficit declined in 2024 to 20.5 percent on nonoil GDP, from 22.1 percent of nonoil GDP in 2023, reflecting strong nonoil tax revenues.
Looking ahead, growth is projected to moderate and inflation to remain within the CBA target. Growth is projected to slow down to 3.5 percent in 2025, reflecting a slowdown in investment and flat hydrocarbon production. In the medium term, growth is projected to be 2 ½ percent, 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 will remain strong.
Risks to the outlook remain broadly balanced but external uncertainty is high. Reduced hydrocarbon prices as a result of higher supply or lower demand could adversely affect growth, external position, and fiscal revenues. Conversely, intensification of conflicts could push hydrocarbon prices higher, providing a temporary boost to external and fiscal position. Deepening geoeconomic fragmentation, as well as trade and investment shocks, could affect prospects for development of the nonhydrocarbon sector and economic diversification, and slower global growth could weigh on Azerbaijan’s prospects. On the other side, trade and investment diversion to the region could also provide new opportunities. On the domestic side, pressures to increase budgetary spending could increase inflation, delay fiscal consolidation, and weaken the fiscal position and fiscal rule credibility. The presence of inefficient SOEs could undermine the development of the private sector, which is key to diversifying the economy and boosting growth.
Executive Board Assessment[2]
In concluding the AIV consultation with Azerbaijan, Executive Directors endorsed the staff’s appraisal as follows:
Executive Directors agreed with the thrust of the staff appraisal. They noted that Azerbaijan’s growth has remained resilient, supported by robust non‑oil sector activity, and inflation is contained. Directors concurred that risks to the outlook are broadly balanced but are subject to significant uncertainty. They called for continued prudent policies and reforms to support diversification and sustainable growth over the medium term.
Directors welcomed the authorities’ adherence to the fiscal targets under the fiscal rule. Cautioning that the expansionary 2025 budget would be procyclical, they broadly called on the authorities to continue with the fiscal adjustment in 2025, including by saving any revenue overperformance or expenditure shortfall to help contain inflationary pressures and reinforce fiscal sustainability. While recognizing Azerbaijan’s investment needs, Directors urged the authorities to pursue fiscal consolidation over the medium term to ensure intergenerational equity, underpinned by revenue and expenditure measures and reforms to strengthen the fiscal rule framework. They noted the benefits of a potential TADAT and PIMA to support these efforts.
Directors viewed the central bank’s current monetary policy stance as appropriate, with inflation within the central bank target band and the recent increase appearing transitory. They emphasized the need to closely monitor inflation risks and to be prepared to act swiftly if needed. Directors welcomed the enhanced monetary policy transmission and called for continued efforts to improve the monetary policy framework to prepare for a possible transition to a hybrid inflation targeting regime.
Directors welcomed the 2024 FSAP’s assessment that Azerbaijan’s financial system is broadly resilient, and the banking sector is well‑capitalized. They commended the authorities for the significant progress in reinvigorating the regulatory reform agenda, and bolstering banks’ capital and liquidity buffers to reinforce financial stability. Directors encouraged continued progress in strengthening prudential oversight and the financial safety net and expanding the systemic risk analysis and stress testing frameworks to address remaining vulnerabilities. In this regard, they underscored the importance of fully implementing consolidated supervision, developing early warning indicators and triggers for supervisory actions, reinforcing the resilience of domestic systemically important banks, and strengthening the emergency liquidity assistance framework.
Directors emphasized the need for private sector development to support economic diversification. They called for continued reforms to strengthen corporate governance in state‑owned enterprises, and to create a level playing field for the private sector. Directors also called on the authorities to continue efforts to improve governance, combat corruption, and further strengthen the AML/CFT framework. They encouraged the authorities to intensify efforts to increase private sector access to finance and contribute to the global climate agenda.
Azerbaijan: Selected Economic and Financial Indicators, 2022–30 |
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Est. |
Projections |
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2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
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(Annual percentage change, unless otherwise specified) |
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National income |
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GDP at constant prices |
4.7 |
1.4 |
4.1 |
3.5 |
2.5 |
2.4 |
2.4 |
2.5 |
2.5 |
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Of which: Oil sector 1/ |
-2.4 |
-2.0 |
0.3 |
0.2 |
-0.5 |
-0.5 |
-0.5 |
-0.5 |
-0.5 |
|
Non-oil sector |
9.1 |
4.5 |
6.2 |
4.5 |
3.7 |
3.5 |
3.5 |
3.5 |
3.5 |
|
Consumer price index (period average) |
13.9 |
8.8 |
2.2 |
5.7 |
4.5 |
4.0 |
4.0 |
4.0 |
4.0 |
|
Consumer price index (end of period) |
14.4 |
2.1 |
4.9 |
5.2 |
4.0 |
4.0 |
4.0 |
4.0 |
4.0 |
|
Money and credit |
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Domestic credit, net |
29.9 |
14.7 |
5.0 |
9.1 |
6.9 |
7.0 |
6.8 |
6.9 |
6.9 |
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Of which: Credit to private sector |
17.4 |
14.7 |
15.9 |
10.0 |
8.0 |
8.0 |
8.0 |
8.0 |
8.0 |
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Manat base money |
-2.8 |
19.4 |
0.4 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
9.0 |
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Manat broad money |
23.8 |
19.6 |
9.0 |
10.6 |
7.9 |
8.4 |
8.3 |
8.4 |
8.4 |
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Total broad money |
23.6 |
5.3 |
11.9 |
9.2 |
6.5 |
7.0 |
7.0 |
7.0 |
7.0 |
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External sector |
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Exports f.o.b. |
94.6 |
-30.8 |
-8.8 |
10.8 |
-10.0 |
-9.9 |
-8.0 |
0.3 |
0.3 |
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Of which: Oil sector |
105.1 |
-34.0 |
-10.1 |
10.8 |
-12.0 |
-12.5 |
-10.7 |
-0.9 |
-0.9 |
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Imports f.o.b. |
29.7 |
21.4 |
2.7 |
12.0 |
0.9 |
3.0 |
5.1 |
6.5 |
6.6 |
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Of which: Oil sector |
56.3 |
12.2 |
-6.9 |
1.4 |
1.5 |
1.7 |
2.1 |
0.0 |
0.0 |
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Real effective exchange rate |
11.8 |
8.1 |
-1.1 |
… |
… |
… |
… |
… |
… |
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(In percent of GDP, unless otherwise specified) |
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Gross investment |
12.1 |
18.3 |
17.8 |
18.3 |
16.2 |
14.6 |
13.7 |
13.7 |
13.7 |
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Consolidated government |
8.0 |
12.2 |
11.3 |
11.7 |
10.0 |
8.8 |
8.1 |
8.1 |
8.1 |
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Private sector |
4.1 |
6.1 |
6.5 |
6.7 |
6.2 |
5.8 |
5.6 |
5.6 |
5.6 |
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Of which: Oil sector |
-6.3 |
-0.3 |
1.1 |
1.3 |
1.5 |
1.6 |
1.7 |
1.6 |
1.6 |
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Gross national savings |
42.1 |
29.8 |
25.7 |
26.1 |
20.4 |
15.1 |
11.3 |
10.4 |
9.6 |
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Consolidated general government finances 2/ |
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Total revenue and grants |
32.1 |
40.6 |
37.1 |
34.4 |
32.8 |
31.0 |
29.8 |
29.5 |
29.2 |
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Total expenditure |
26.2 |
32.7 |
33.8 |
35.6 |
34.5 |
33.4 |
32.5 |
31.7 |
31.0 |
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Current expenditure |
18.2 |
20.5 |
22.5 |
23.9 |
24.4 |
24.6 |
24.4 |
24.4 |
24.0 |
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Net acquisition of non-financial assets |
8.0 |
12.2 |
11.3 |
11.7 |
10.0 |
8.8 |
8.1 |
7.3 |
7.0 |
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Overall fiscal balance |
6.0 |
7.9 |
3.2 |
-1.3 |
-1.7 |
-2.4 |
-2.8 |
-2.1 |
-1.8 |
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Non-oil primary balance, in percent of non-oil GDP |
-22.4 |
-22.1 |
-20.5 |
-22.1 |
-18.6 |
-16.3 |
-14.5 |
-12.7 |
-11.3 |
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General government debt 3/ |
17.3 |
21.8 |
20.9 |
21.0 |
22.2 |
22.7 |
23.1 |
23.8 |
23.8 |
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General government and government-guaranteed debt |
26.9 |
28.9 |
27.6 |
27.6 |
28.6 |
28.9 |
29.1 |
29.6 |
29.4 |
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External sector |
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Current account (- deficit) |
29.8 |
11.5 |
7.8 |
7.8 |
4.1 |
0.5 |
-2.4 |
-3.3 |
-4.2 |
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Foreign direct investment (net) |
-6.5 |
-2.9 |
-0.7 |
-0.4 |
-0.2 |
0.0 |
0.2 |
0.4 |
0.5 |
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Memorandum items: |
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Gross official international reserves (in millions of U.S. dollars) |
8,996 |
11,281 |
10,960 |
10,760 |
10,560 |
10,360 |
10,160 |
9,960 |
9,760 |
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in months of next year's non-oil imports f.o.b. |
5.4 |
7.7 |
6.6 |
6.4 |
6.1 |
5.7 |
5.3 |
4.9 |
4.6 |
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Nominal GDP (in millions of manat) |
133,973 |
123,128 |
126,337 |
134,078 |
139,182 |
145,847 |
153,556 |
162,135 |
171,522 |
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Nominal non-oil GDP (in millions of manat) |
69,764 |
78,990 |
85,712 |
94,674 |
102,595 |
110,434 |
118,825 |
127,903 |
137,675 |
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Nominal GDP (in millions of U.S. dollars) |
78,807 |
72,429 |
74,316 |
78,870 |
81,872 |
85,792 |
90,327 |
95,373 |
100,895 |
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Oil Fund Assets (in millions of U.S. dollars) |
49,034 |
56,070 |
60,031 |
60,911 |
61,797 |
61,864 |
61,594 |
62,222 |
62,949 |
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Assumed oil price, WEO plus $2-$3 premium (in U.S. dollars per barrel) |
98.4 |
82.6 |
81.2 |
78.6 |
73.5 |
71.6 |
70.6 |
72.0 |
73.4 |
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Assumed natural gas price, WEO plus a premium (in U.S. dollars per thousands of cubic meters) |
1340.0 |
460.1 |
389.0 |
517.4 |
424.7 |
342.2 |
290.2 |
290.2 |
290.2 |
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Exchange rate (manat/dollar, end of period) |
1.7 |
1.7 |
1.7 |
… |
… |
… |
… |
… |
… |
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Sources: National authorities; and IMF staff estimates and projections. |
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1/ Includes the production and processing of oil and gas. |
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2/ Consolidates State Budget, State Oil Fund of Azerbaijan (SOFAZ), Nakhchevan Autonomous Region (NAK) and State Social Protection Fund. |
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3/ Starting in 2021, includes guarantees issued to Aqrakredit for its acquisition of distressed assets from the IBA. |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
