High energy prices are expected to support Azerbaijan’s economic growth in the near term via the European Bank for Reconstruction and Development (EBRD).

“Hence, GDP growth of 4.5 percent is forecast in 2022, with a moderation to 2.5 percent in 2023. The risks are balanced and largely arise from the direction of energy prices and, to a smaller degree, from the likely inflation path. The strong performance of the non-energy sector led to economic growth of 6.2 percent year-on-year in the first seven months of 2022,” reads the September edition of the Regional Economic Prospects report.

EBRD says that the nonenergy sector increased production by 9.9 percent, while hydrocarbon sectors decreased by 0.4 percent, with oil production down 4.5 percent, though gas production increased by 15.3 percent.

“However, rising prices of hydrocarbons almost doubled export revenues and generated a large current account and budget surplus. This created a favorable environment to sustain household real incomes, despite rising inflation, which in turn supported the strong growth of nontradable sectors of the economy.

Inflation accelerated further from 12.0 per cent at the end of 2021 to 14.2 percent in June 2022, but slowed down to 13.7 percent in July as a first sign of abating inflationary pressures. The Central Bank of Azerbaijan responded firmly to rising inflation in the initial stage and raised the policy rate by 150 basis points between September 2021 and March 2022, but remained cautious afterwards,” the report says.