Baku: Azerbaijan's economy experienced significant growth in 2024, primarily driven by the non-oil sector and public investment. Real GDP expanded by 4.1 per cent in 2024, an increase from 1.4 per cent in 2023, with non-oil growth reaching 6.2 per cent compared to 3.7 per cent in the previous year.
According to Azeri-Press News Agency, as reported by Azeri-Press News Agency, the construction, ICT, transportation, and tourism sectors were the main contributors to this non-oil growth. Economic activity was bolstered by rising real incomes and infrastructure investment. Additionally, the oil and gas sector returned to growth in March 2024, with gas production expanding to satisfy European demand. However, in the first quarter of 2025, real GDP grew by only 0.3 per cent year on year, compared to 4 per cent during the same period in 2024, as weaker oil and gas sector output offset the solid momentum in the non-oil sector.
Inflation remained within a controlled range, fluctuating between 0 per cent in April 2024 and 5.9 per cent in March 2025. The recent increase was driven by food and services prices but stayed within the Central Bank of Azerbaijan's target range of 4 per cent (±2 per cent). The CBAR reduced the key policy rate by 175 basis points from 9 per cent in November 2023 to 7.25 per cent by May 2024, maintaining it at this level since. To manage strong credit growth, the CBAR activated a 0.5 per cent countercyclical capital buffer, effective from March 2025.
According to EBRD, real GDP growth is expected to moderate to 3 per cent in 2025 and 2.5 per cent in 2026, supported by continued expansion in the non-oil economy and sustained public investment. However, the outlook is susceptible to fluctuations in oil and gas prices amid increased trade policy uncertainty, weaker external demand, and potential setbacks in regional normalisation efforts. In the medium term, trade along the Middle Corridor connecting China to Europe could present opportunities for Azerbaijan's transport and logistics sectors, as peace-building efforts may unlock new trade routes and investment flows.