Azerbaijan News 16 October 2026 09:46 (UTC +04:00)
Photo: National Bank of Georgia
BAKU, Azerbaijan, October 16. Deviations from Azerbaijan's baseline inflation forecast are expected to have a limited impact on the non-oil primary deficit as a share of non-oil GDP and on the consolidated budget balance over the medium term.
This was reflected in the Medium-Term Expenditure Framework prepared by the country's Ministry of Finance for the next four years.
The document identifies persistent global uncertainty, price trends in major trading partners, and volatility in global commodity markets as the main external risk factors affecting inflation.
In particular, continued geopolitical tensions in the Middle East could trigger additional volatility in energy and other commodity prices. Meanwhile, a weakening of the nominal effective exchange rate could accelerate the pass-through of imported inflation to domestic prices.
Regarding domestic factors, the document assesses the likelihood of aggregate demand increasing sufficiently to significantly intensify inflationary pressures as low under the current fiscal and monetary policy framework.
According to the document, the assessment of the fiscal impact of inflation risks takes into account the potential effects of price changes on nominal GDP, budget revenues, and fiscal indicators expressed as a share of GDP.
Inflation risks were assessed under scenarios in which inflation deviates from the baseline forecast by 0.4, 0.8, 1.1 and 1.5 percentage points in either direction.
The calculations show that, under the scenarios considered, inflation is expected to have a limited impact on the non-oil primary deficit as a share of non-oil GDP and on the consolidated budget balance in 2027-2030.
In 2027, the non-oil primary deficit as a share of non-oil GDP is expected to deviate from the baseline scenario by 0.1-0.4 percentage points under different inflation scenarios.
The projected impact of inflation on the consolidated budget balance is even smaller. Under the different scenarios, the balance is expected to deviate from the baseline by 0.1-0.3 percentage points in 2027.
According to the charts, the non-oil primary deficit as a share of non-oil GDP stood at approximately 22.5% in 2022 and is projected to reach around 17.5% in 2027. The indicator is expected to improve from 2028, declining to approximately 10%-11% by 2030.
The consolidated budget balance as a share of GDP stood at approximately 6% in 2022 and 8% in 2023. It is projected to remain in deficit in 2026-2027 before gradually improving from 2028.
The Ministry of Finance considers the management of fiscal risks associated with inflation important for maintaining macroeconomic stability. According to the document, flexible budget policies and targeted social protection programs will help minimize the adverse effects of unexpected price increases.