The Republic of Azerbaijan: Staff Report for the 2026 Article IV Consultation

The 2026 Article IV Consultation highlights that following strong performance in 2024, Azerbaijan’s economic growth moderated to 1.4 percent in 2025, as oil-sector disruptions and slower non-hydrocarbon activity weighed on output. IMF recommends to stay on course with fiscal consolidation, including saving any windfall from elevated hydrocarbon prices. The planned consolidation is appropriate for intergenerational equity and long-term external sustainability. Elevated hydrocarbon prices from the war in the Middle East are expected to strengthen Azerbaijan’s fiscal and external positions in the near term, but inflationary pressures could emerge. Azerbaijan should remain focused on private-sector-led economic diversification. Expanding the role of the private sector in diversification, including through foreign direct investments, calls for deepening capital markets to increase the private sector’s access to finance, as well as increasing labor productivity through human capital investment, and continuing reforms aimed at tackling labor market informality. Sustained fiscal consolidation and private sector-led diversification away from hydrocarbon production remain the key policy priorities, given declining hydrocarbon reserves.