World Bank raises inflation forecast for Azerbaijan in 2024

The World Bank (WB) has revised its forecast for annual inflation in Azerbaijan for 2024, raising it from the April figure of 3% to 4.2%, Report informs via the bank.

The updated report also indicates that the inflation forecast for 2025 has been lowered from 3.5% to 3.4%, while for 2026, it has been reduced from 4% to 3%.

The report highlights that inflation in 2024 is expected to remain within the target range set by the Central Bank of Azerbaijan (CBA), despite some acceleration in the second half of the year due to fuel price increases in June. In the medium term, assuming no significant external pressures, the average annual inflation is projected to be around 3.2% (previously expected to be 2.2%), amid slowing domestic demand.

The World Bank also points to the ongoing geopolitical tensions, which create additional uncertainty and may impact commodity prices. A

In 2023, annual inflation reached 2.1%, approaching the lower bound of the CBA's target range (4% ± 2%). According to the State Statistics Committee, the average annual inflation for January-September of the current year was 1.5%. During this period, prices for food, beverages, and tobacco products increased by an average of 0.4%, non-food products by 1.4%, and paid services by 3.3%.

The Central Bank, in its July statement, projected that core inflation would be 5.4% in 2024 and 5.5% in 2025. The revision of forecasts is associated with expectations of a slower strengthening of the nominal effective exchange rate of the manat and changes in prices and tariffs for state-regulated goods and services. The CBA also estimates the overall impact of regulated price increases on inflation at 1.5 percentage points, of which 1 point may be realized in 2024.