Azerbaijan Economic Outlook
Annual economic growth eased to 0.1% in January–April from 0.4% in January–March. The slowdown was mainly driven by weaker retail activity. Moreover, fixed investment growth waned markedly. On the flip side, industrial production in the non-oil-and-gas sector strengthened, while the downturn in overall industrial output softened. Growth is likely to remain subdued during the remainder of Q2 due to a tough base and higher interest rates. In other news, the country made significant progress on peace talks with Armenia recently. During May, authorities met in separate meetings with U.S. Secretary of State Blinken, European Council President Michel and President Putin of Russia. These discussions led Armenian Prime Minister Pashinyan to recognize Nagorno-Karabakh as part of Azerbaijan. This may lead to a permanent peace deal and, as a result, increased regional stability and trade.
Inflation came in at 12.9% in April, down from March’s 13.7%. Inflation is forecast to ease further in the coming months as the effect of recent interest rate hikes is increasingly felt. However, it is still forecast to average above the Central Bank’s 2.0–6.0% target band this year.