Azerbaijan's external economic position is expected to strengthen more than previously forecast in 2026, supported by favourable conditions in commodity markets and prudent macroeconomic policies, according to the International Monetary Fund (IMF).
In its latest assessment of the Caucasus and Central Asia (CCA) region, the IMF indicated that Azerbaijan and Kazakhstan are likely to record more substantial improvements in their external positions than projected in April.
The Fund attributed the upward revisions primarily to higher revenues from oil exports, which are expected to support the external balances of both energy-producing economies.
However, the IMF warned that these favourable conditions could weaken from 2027 as energy prices decline, potentially reducing export revenues and affecting the external positions of oil-producing countries.
Despite the improved external outlook, the Fund has slightly lowered its economic growth projections for Azerbaijan, Kazakhstan and Turkmenistan for 2026.
The downward revisions reflect supply-side constraints expected to limit activity in the oil production sector, alongside less expansionary fiscal policies.
The IMF also highlighted the impact of disruptions to regional trade routes, particularly those passing through Iran and Russia.
According to the assessment, these disruptions have prompted businesses and transport operators to redirect shipments and reorganise supply chains, affecting trade and logistics across the wider region.
The Fund had previously identified a slowdown in economic activity in Azerbaijan and Kazakhstan, reflecting challenges facing their energy sectors.
Meanwhile, inflation in Azerbaijan has remained relatively stable, supported by easing pressure from domestic consumer demand.
The IMF also observed improvements in trade balances among the region's oil-exporting economies, reflecting the contribution of energy export revenues to their external accounts.
Overall, the Fund's assessment points to a mixed outlook for Azerbaijan in 2026, with stronger external balances expected to accompany more moderate economic growth.
The IMF's projections also suggest that the sustainability of these improvements will depend partly on developments in global energy markets, particularly as lower oil prices are anticipated from 2027.