Azerbaijan’s economy is expected to gain moderate momentum in 2026, with real GDP growth projected to reach 2.5%, up from 1.4% in 2025, according to a new forecast by Fitch Solutions. Analysts link the anticipated improvement primarily to stronger domestic demand, stabilizing inflation, and continued expansion in the non-oil sector, despite ongoing pressure on hydrocarbon production.
Fitch Solutions expects household consumption to become the main driver of economic growth next year. A stable labor market, unemployment near 5.2%, and rising real wages are forecast to support consumer spending and strengthen overall economic activity. Private consumption could contribute around 2.5 percentage points to GDP growth, reflecting improving consumer confidence and slower price increases compared with the previous year.
Despite hydrocarbons remaining dominant in exports, diversification policies are increasingly reshaping Azerbaijan’s economic structure. By the end of 2025, the non-oil sector accounted for more than half of GDP, supported by targeted economic reforms and expanding trade and investment ties with partners including China, Germany, Türkiye and several European countries. Growth in services, logistics, and manufacturing is expected to help cushion the economy against external price shocks.
At the same time, declining oil production continues to limit overall expansion. Output fell notably in 2025, weighing on headline growth despite strong performance in non-energy sectors. Fitch Solutions expects these constraints to persist, reinforcing the importance of domestic demand and diversification efforts.
Average inflation is projected to ease to about 5% in 2026, down from 5.6% in 2025, remaining within the Central Bank of Azerbaijan’s target range of 2–6%. The regulator is expected to maintain a cautious monetary policy stance and preserve relative stability of the manat. However, risks remain tilted to the upside due to geopolitical tensions and potential disruptions in food imports, particularly from Russia, which still supplies a significant share of grain, dairy, and meat products to Azerbaijan.
Overall, Fitch Solutions describes the outlook for 2026 as one of moderate but more balanced growth, with domestic consumption and the expanding non-oil economy gradually offsetting structural challenges facing the energy sector.
