BAKU, Azerbaijan, March 27. The GDP of Azerbaijan is set to level off, with a steady 2-3 percent growth on the horizon in the years to come, Trend reports, citing a report from the Netherlands' largest banking group, Internationale Nederlanden Groep (ING).
"Economic growth momentum in Azerbaijan seems to be moderating, as full-year GDP growth was reported at 4.1 percent, after 4.7 percent YoY in 9M24. This slowdown reflected a reduced output from the non-fuel sectors, from 7.0 percent YoY in 9M24 to 3.9 percent YoY in 4Q24, most likely reflecting moderation in construction and transportation activity, which drove the previous acceleration. The fuel sector managed to make a positive contribution for most of the year, but the overall dynamic remains volatile and generally sluggish, as the increased gas output is not expected to be enough to offset maturing oil production. We see GDP growth stabilizing in the 2-3 percent range in the coming years," the report reads.
According to the forecast, real GDP growth in Azerbaijan is expected to reach three percent in 2025 and 2.5 percent in 2026.
"The mood in the consumption-driven sectors seems to remain positive thanks to continued growth in real income and employment, as well as fast retail credit expansion. Meanwhile, as domestic retail loans are now 14 percent of GDP (23 percent of non-oil GDP) vs. 8 percent (17 percent) in 2022, and growth in real terms has slowed from 23 percent YoY at the beginning of 2024 to 15-16 percent currently, consumption growth should moderate," ING analysts said.
The report also highlights a significant slowdown in corporate lending in 2024, reflecting more cautious sentiment in certain corporate segments.
"In the meantime, at 10 percent of GDP (16 percent of non-oil GDP), domestic corporate lending doesn’t seem to be the primary source of financing and is not a sign of an overall slowdown. The direct indicators of industrial confidence continue to show strong readings despite sluggish activity in the oil sector, most likely reflecting the optimism surrounding Azerbaijan’s fiscal policy, which remains generous," ING analysts noted.
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