Fitch says higher energy prices may accelerate Azerbaijan’s economic growth

Higher oil and gas prices may accelerate Azerbaijan’s economic growth in 2026 and strengthen the country’s external and public finances, Fitch Ratings said.

The agency said rising hydrocarbon prices amid the Middle East conflict would support Azerbaijan’s twin surpluses. Under Fitch’s baseline scenario, Azerbaijan’s current account surplus is expected to remain at 4.5% of GDP in 2026, while the consolidated budget surplus is forecast at 2.1% of GDP, despite an expected decline in returns on the State Oil Fund’s assets.

Fitch analysts expect economic growth to accelerate in 2026 after slowing sharply to 1.4% in 2025 from 4.1% in 2024.

The agency said the share of the non-oil sector in the economy remains volatile and is still heavily influenced by oil prices. The indicator fell by 9 percentage points from a peak of 63.5% in 2015, as oil prices rose to a 14-year high in 2022.

Fitch also noted a growing contribution from the services sector, including information and communications technology and tourism. In 2025, each of those sectors contributed 0.2 percentage points to economic growth.

Azerbaijan’s strategic location, including its major Caspian Sea port, is also strengthening its role as a transit hub along the Middle Corridor, Fitch said. Since the start of the war in Ukraine, land transport volumes have more than doubled, averaging 27% of services exports in 2022-2024, while their share in GDP rose to 2.3%.

Fitch also pointed to a significant rise in non-oil budget revenues, which accounted for about half of total revenues in 2022-2025, or around 13% of GDP.

Under Azerbaijan’s fiscal rule, the non-oil deficit should be reduced to below 13% of non-oil GDP by 2029, compared with 20.4% in 2024. Fitch said achieving that target would require further growth in non-oil revenues, stronger institutions, tighter spending controls and clearer fiscal benchmarks.

N. Tebrizli