Azerbaijan Economic Outlook
Cumulative GDP data revealed that the economy contracted by 1.5% in January relative to the year-earlier month. The weaker performance of the oil and gas sector was behind the downtick. However, activity in the non-oil and gas sector continued to expand, with both industrial and agricultural output growing at healthy rates. In other news, in mid-February Azerenerji—the largest electricity producer in the country—signed a USD 171 million deal with Italian firm Ansaldo Energia for the purchase of four gas turbines. The high level of efficiency of these turbines should mean that more gas will be available for export, strengthening the country’s energy links with Europe. Meanwhile, a key road between Armenia and Nagorno-Karabakh remained blocked in February, despite the mediation of Russian President Vladimir Putin and an International Court of Justice order to allow free movement.
Inflation edged down to 13.6% in January from December’s 13.9%. The downtick was chiefly driven by softer price pressures for food items. Inflation is forecast to decline further this year as the effect of higher interest rates is increasingly felt. However, it is seen averaging above the Central Bank’s 2.0–6.0% target band.