Azerbaijan's finance ministry has raised its average annual inflation forecast for 2026 to 5.7%, up from the 4.8% projected earlier, according to a mid-year budget execution and year-end outlook document published by the ministry and cited by Report.

The revision reflects actual inflation recorded in the first half of the year, global commodity and food prices and their pass-through to import prices, and changes to regulated goods and services tariffs, the ministry said.

The ministry also cut its forecast for non-oil, non-gas GDP growth to 3.1% from 3.7%, while leaving the overall economic growth forecast unchanged at 1.7%.

State budget revenues are now expected to reach AZN39,365mn ($23.16bn) by the end of 2026, AZN756mn or 2% above the approved forecast. Of this, 43.4%, or AZN17.1bn, is attributed to the oil and gas sector and 56.6%, or AZN22.3bn, to the non-oil economy. Oil and gas revenues are expected to come in at AZN650mn, or 4%, above target, while non-oil revenues are seen AZN106mn, or 0.5%, above plan.

Tax and duty receipts are forecast at AZN17.7bn, AZN850mn or 5% above the approved figure, of which AZN4.3bn is attributed to the oil and gas sector and AZN13.5bn to the non-oil economy. Transfers from the State Oil Fund (ARDNF) are expected to remain unchanged at AZN12.8bn.

The revenue outlook was underpinned by a higher assumed gas price, with the average sale price of Azerbaijani gas across all destinations raised by $35 to $296 per 1,000 cubic metres. The ministry said the increase is expected to lift profit tax receipts from contractors operating under the Shahdeniz production-sharing agreement by AZN400mn, or 25%.

State budget expenditure is forecast at AZN40.9bn, 2% below the approved level. Current expenditure is expected to total AZN24.7bn, capital expenditure AZN13.7bn, and public debt servicing costs AZN2.4bn, in line with the approved figure. Spending is expected to come in below plan across most functional categories, including defence and national security (down 1.8%), education (down 2.7%) and economic activity (down 2%).

The state budget deficit is projected at AZN1.5bn, or 1.1% of GDP, to be financed through domestic borrowing and treasury account balances. The consolidated budget's non-oil primary deficit is expected to fall to 17.5% of non-oil GDP, against a planned 18.8%.

Public debt servicing costs stayed within the ceiling set in the government's medium- and long-term debt management strategy, which caps such spending at no more than 10% of budget expenditure; the actual ratio for the first half of the year was 5.6%. Total public debt is forecast to reach AZN27.6bn by January 1, comprising $4.8bn in external debt and AZN19.4bn in domestic debt. Around 59.5% of external debt is due within five years, 34.9% within five to ten years, and 5.6% beyond ten years.

The average export price of Azeri Light crude stood at $94.5 per barrel in the first half of 2026, 45.4% above the $65 assumed in the original 2026 budget parameters. Monthly average prices ranged from $58.4 in January to a peak of $120.1 in April, before easing to $89 in June.

The finance ministry prepared the document in line with the requirements of international fiscal diagnostic tools, covering the macroeconomic and budget execution picture for the first half of the year alongside its year-end forecasts.