BAKU, Azerbaijan, September 23. The external
position of Azerbaijan has remained strong, supported by higher
hydrocarbon prices, says the Asian Development Bank.


ADB says in its Asian Development Outlook that in the first
quarter of 2026, the current account recorded a surplus of $1.7
billion, equivalent to 9.5% of GDP, compared to 6.5% of GDP during
the same period of 2025.


“Merchandise trade amounted to $9.9 billion, with exports
totaling $6.0 billion and imports $3.9 billion. As in previous
years, a surplus in oil and gas trade offset a deficit in other
goods, creating an overall trade surplus of $2.0 billion.
Non-hydrocarbon exports increased by 9.5%, while non-hydrocarbon
imports grew by 7.7%. The services balance remained negative,
although a larger decline in service imports (7.2%) than in exports
(1.7%) cut the deficit to $0.6 billion from $0.8 billion in the
first quarter of 2025. During the first six months of 2026,
combined foreign exchange reserves held by the sovereign wealth
fund and the central bank increased by $0.6 billion to $85.8
billion, equivalent to 113% of GDP and about 19 times the country’s
public external debt. Central bank reserves stood at $13.2 billion,
cover for about 10 months of goods imports,” reads the report.


ADB notes that weak demand helped trim cost-push inflation
during the first half of 2026.


“Average annual inflation declined from 5.9% in the first half
of 2025 to 5.7% in the first half of 2026, driven by price
increases of 6.7% for food, 3.8% for other goods, and 5.7% for
services. Although higher hydrocarbon prices in Azerbaijan’s
trading partners were expected to pass through to the domestic
economy, declining demand slowed the transmission of inflation from
import prices. Inflation is expected to rise for the remainder of
2026 as the effects of higher hydrocarbon prices continue to feed
into the domestic economy. In response to rising inflation
expectations, the central bank paused its monetary easing cycle and
raised its inflation forecast. With higher inflation expected in
the second half of 2026, ADB has raised its projections for 2026
and 2027,” said the Bank.







The ADB has raised its inflation forecasts for Azerbaijan from
5.7 percent to 5.9 percent for 2026 and from 4.9 percent to 5
percent for 2027.


Meanwhile, according to the July baseline forecast of the
Central Bank of Azerbaijan, annual inflation is expected to reach
6.1% by the end of 2026, 6% in June 2027 and 5.8% by the end of
2027. The central bank expects annual inflation to return to its
target range from the second half of 2027.


The CBA said the upward revision to its inflation forecast was
mainly driven by stronger direct and indirect cost pressures
originating from external factors, which it expects to be temporary
over the medium term. The central bank also noted that the
deviation of its end-2026 inflation forecast from the target
remains within the margin of forecast error.