BAKU, Azerbaijan, May 28. The International
Monetary Fund (IMF) expects inflation in Azerbaijan to gradually
ease and stabilize at 4 percent from 2028 through 2031, Trend
reports.
According to the IMF forecasts, Azerbaijan’s consumer price
index (CPI) is projected at 6 percent in 2026, before slowing to
4.2 percent in 2027 and stabilizing at 4 percent annually in the
following years through 2031.
For comparison, inflation in Azerbaijan stood at 2.1 percent in
2023, accelerated to 4.9 percent in 2024, and is expected to reach
5.2 percent in 2025.
“Inflation is projected to pick up to 6.0 percent by end-2026,
assuming higher imported food inflation amid the war in the Middle
East, which could also erode real incomes and reduce demand.
Nonetheless, the current account surplus is expected to improve
significantly in 2026, owing to the increase in hydrocarbon prices,
before weakening gradually over the medium term,” said the
Fund.
IMF believes that the Central Bank should raise policy rates if
inflationary pressures persist. While inflation is projected to
fall over the forecast horizon, close monitoring of risks to
inflation and responding to inflation surprises will be important,
given elevated external uncertainty, upside risks to inflation from
the ongoing war in the Middle East, and still developing monetary
policy passthrough.
“Clear and forward-looking communication is becoming
increasingly important as the central bank relies more on inflation
forecasts to guide monetary policy. The interbank market rates
remain close to the policy rate, reflecting successful management
of excess liquidity by the CBA. Material improvement in the
passthrough to the broader economy will require further development
of a risk-free yield curve, and continuing progress in addressing
long-standing structural issues such as dollarization, high
operating costs, and low competition in the banking sector,” said
the Fund.
