The World Bank has revised its inflation forecast for Azerbaijan in 2024, raising the expected rate from 3% to 4.2%. The updated projections also slightly lowered inflation forecasts for 2025, from 3.5% to 3.4%, and for 2026, from 4% to 3%. According to the report, despite the anticipated inflation increase in the second half of 2024—primarily driven by fuel price hikes in June—inflation is expected to stay within the target range set by the Central Bank of Azerbaijan (CBA).

In the medium term, with limited external pressures, the World Bank now projects average annual inflation to be around 3.2%, higher than the previously expected 2.2%, as domestic demand is expected to slow.

The report also acknowledged ongoing geopolitical tensions that could introduce uncertainty, particularly impacting commodity prices. In 2023, annual inflation reached 2.1%, near the lower end of the CBA’s target range of 4% ± 2%. According to the State Statistics Committee, the average inflation for January-September 2023 was 1.5%, with food, beverages, and tobacco prices increasing by 0.4%, non-food products by 1.4%, and paid services by 3.3%.

In a July statement, the CBA projected core inflation to be 5.4% in 2024 and 5.5% in 2025. The revisions in forecasts are tied to expectations of slower strengthening of the nominal effective exchange rate of the manat, as well as changes in prices and tariffs for state-regulated goods and services. The CBA estimated that these regulated price increases would contribute 1.5 percentage points to overall inflation, with 1 percentage point likely to be realized in 2024.