Azerbaijan's economy is forecast to grow by 1.7 per cent in 2026 and 2.3 per cent in 2027, according to the International Monetary Fund (IMF), while growth across the wider Caucasus and Central Asia region is expected to slow.
The IMF's October 2026 Regional Economic Outlook forecasts growth across the Caucasus and Central Asia at 5.2 per cent this year, down from 6.2 per cent in 2025, before easing further to 5 per cent in 2027.
Azerbaijan's projected growth represents a gradual acceleration from 1.4 per cent in 2025. However, the IMF has slightly lowered its 2026 forecast for the country since April, citing supply constraints affecting oil-sector activity and a less accommodative fiscal policy stance.
The regional outlook contrasts with the sharper economic disruption affecting Gulf oil exporters, where the IMF expects the Gulf Cooperation Council (GCC) economy to contract by 4.8 per cent in 2026.
The IMF expects economic growth in the Caucasus and Central Asia to remain relatively strong, although the outlook differs significantly between oil-producing and oil-importing economies.
Oil importers are forecast to expand by 7.6 per cent in 2026, compared with 3.7 per cent growth among oil exporters.
In 2027, growth is expected to moderate to 6.4 per cent for oil importers, while accelerating to 4.1 per cent for exporters.
The IMF has raised its 2026 growth forecast for the region's oil importers by 1.5 percentage points since April, driven by stronger prospects in Georgia, the Kyrgyz Republic, Tajikistan and Uzbekistan.
Strong investment, remittances and financial and capital inflows are expected to help these economies offset negative shocks from regional conflicts.
Among oil exporters, Kazakhstan's economy is projected to grow by 4.4 per cent in 2026, followed by Turkmenistan at 2.4 per cent and Azerbaijan at 1.7 per cent.
The IMF has slightly lowered its forecasts for all three oil exporters since April, reflecting supply constraints expected to limit oil-sector activity. In Azerbaijan, a less accommodative fiscal policy stance is an additional factor.
Despite the slower pace of economic expansion, the IMF expects Azerbaijan's external position to improve more rapidly in 2026 than projected in April, supported by higher oil revenues.
The fund forecasts crude oil prices averaging close to $96 a barrel in 2026, compared with its April projection of $82.20.
For 2027, the IMF expects prices to average approximately $87 a barrel, up from its previous forecast of $76.
Higher energy prices can strengthen export revenues and external balances, but Azerbaijan's real GDP growth remains constrained by oil-sector supply limitations.
The IMF also expects Azerbaijan to continue fiscal consolidation in 2026 and beyond, while economic growth is projected to reach 2.5 per cent by 2031.
The outlook for the Caucasus and Central Asia differs from that of several Gulf economies directly affected by the Middle East conflict.
The IMF forecasts a 4.8 per cent contraction across the GCC in 2026, following growth of 4.5 per cent in 2025.
Kuwait is expected to record a 16.7 per cent contraction, followed by Qatar at 15.6 per cent and Bahrain at 11.3 per cent.
Saudi Arabia and the United Arab Emirates are forecast to contract by 3.3 per cent and 3.9 per cent respectively, while Oman is expected to grow by 4.1 per cent.
The IMF attributes the downturn to disruptions in hydrocarbon production and exports, alongside weaker trade, logistics and business confidence.
Across the Middle East, North Africa, Afghanistan and Pakistan, the IMF forecasts a 1.3 per cent contraction in 2026, followed by a 6.6 per cent rebound in 2027.
The projected recovery depends on energy production and trade gradually returning to normal.
The IMF's baseline assumes disruptions will continue through the first quarter of 2027, followed by a gradual recovery in flows through the Strait of Hormuz.
However, the fund warns that renewed hostilities or further disruption to energy routes could prolong economic losses and push energy prices higher.
Even with the projected rebound, cumulative economic output between 2026 and 2030 in countries directly affected by the conflict is expected to remain below pre-conflict projections.
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