BAKU, Azerbaijan, September 23. The external position of Azerbaijan has remained strong, supported by higher hydrocarbon prices, says the Asian Development Bank.
ADB says in its Asian Development Outlook that in the first quarter of 2026, the current account recorded a surplus of $1.7 billion, equivalent to 9.5% of GDP, compared to 6.5% of GDP during the same period of 2025.
“Merchandise trade amounted to $9.9 billion, with exports totaling $6.0 billion and imports $3.9 billion. As in previous years, a surplus in oil and gas trade offset a deficit in other goods, creating an overall trade surplus of $2.0 billion. Non-hydrocarbon exports increased by 9.5%, while non-hydrocarbon imports grew by 7.7%. The services balance remained negative, although a larger decline in service imports (7.2%) than in exports (1.7%) cut the deficit to $0.6 billion from $0.8 billion in the first quarter of 2025. During the first six months of 2026, combined foreign exchange reserves held by the sovereign wealth fund and the central bank increased by $0.6 billion to $85.8 billion, equivalent to 113% of GDP and about 19 times the country’s public external debt. Central bank reserves stood at $13.2 billion, cover for about 10 months of goods imports,” reads the report.
ADB notes that weak demand helped trim cost-push inflation during the first half of 2026.
“Average annual inflation declined from 5.9% in the first half of 2025 to 5.7% in the first half of 2026, driven by price increases of 6.7% for food, 3.8% for other goods, and 5.7% for services. Although higher hydrocarbon prices in Azerbaijan’s trading partners were expected to pass through to the domestic economy, declining demand slowed the transmission of inflation from import prices. Inflation is expected to rise for the remainder of 2026 as the effects of higher hydrocarbon prices continue to feed into the domestic economy. In response to rising inflation expectations, the central bank paused its monetary easing cycle and raised its inflation forecast. With higher inflation expected in the second half of 2026, ADB has raised its projections for 2026 and 2027,” said the Bank.
The ADB has raised its inflation forecasts for Azerbaijan from 5.7 percent to 5.9 percent for 2026 and from 4.9 percent to 5 percent for 2027.
Meanwhile, according to the July baseline forecast of the Central Bank of Azerbaijan, annual inflation is expected to reach 6.1% by the end of 2026, 6% in June 2027 and 5.8% by the end of 2027. The central bank expects annual inflation to return to its target range from the second half of 2027.
The CBA said the upward revision to its inflation forecast was mainly driven by stronger direct and indirect cost pressures originating from external factors, which it expects to be temporary over the medium term. The central bank also noted that the deviation of its end-2026 inflation forecast from the target remains within the margin of forecast error.
