The Central Bank of Azerbaijan (CBA) has sharply revised down its 2026 GDP growth forecast to 1.1% from the 2.4% projected in February, while nearly doubling its current account surplus forecast to $5.5bn from a prior range of $2.8-3.0bn, governor Taleh Kazimov said on May 7.

The growth downgrade reflects the impact of elevated global geopolitical tensions on trade and supply chains, even as commodity export revenues benefit from higher prices. The non-oil sector slowdown points to softer domestic demand conditions that the CBA has chosen not to counteract with looser monetary policy, citing inflation risks.

The divergence reflects stronger-than-expected external sector performance, driven by higher hydrocarbon export prices and expanding non-oil exports, offset by weaker domestic economic momentum.

Non-oil and gas sector growth is now projected at 3.2% for 2026, down from the February forecast of 4.0%. For 2027, the CBA expects overall GDP to grow 3.2% and the non-oil sector 4.7%, compared to earlier projections of 2.9% and 4.3% respectively.

The current account improvement is underpinned by a strong external trade position. Azerbaijan posted a $1.4bn trade surplus in Q1 2026, up 93.3% year on year according to customs statistics. For 2027, the CBA now forecasts a current account surplus of $4.4bn, compared to its earlier projection of $2.7-2.8bn. The bank updated its current account forecasts in both 2026 and 2027 in an improving direction.

The revised oil and gas price assumptions behind the forecasts are markedly higher than February estimates. The CBA now expects Brent crude to average $84.5/barrel in 2026 and $78/barrel in 2027, against February projections of $65/barrel for both years. For natural gas, the bank projects $324/1,000 cm in 2026 and $290/1,000 cm in 2027, up from $269 and $254 respectively.

Foreign exchange reserves rose 10.2% in the first four months of the year to $12.7bn, reflecting the FX market surplus and the CBA's buy-side intervention in April.