OMM Newsroom
Azerbaijan’s economy is expected to grow by 1.7% in 2026 and 2.3% in 2027, according to the International Monetary Fund’s (IMF) October 2026 Regional Economic Outlook, which forecasts slower growth across the Caucasus and Central Asia.
The regional economy is expected to expand by 5.2% in 2026, down from 6.2% in 2025, AnewZ reported. The IMF forecasts that growth will slow further to 5% in 2027.
The forecast for Azerbaijan marks a gradual increase from 1.4% growth in 2025. However, the IMF has slightly lowered its 2026 projection for the country compared with April, citing supply constraints affecting activity in the oil sector and a less accommodative fiscal stance.
Although growth in the Caucasus and Central Asia is expected to remain relatively strong, there will be a significant difference between oil-producing and oil-importing economies. Oil importers are forecast to grow by 7.6% in 2026, compared with 3.7% for oil exporters. In 2027, growth among importers is expected to ease to 6.4%, while it is projected to rise to 4.1% among exporters.
Since April, the IMF has raised its 2026 growth forecast for the region’s oil importers by 1.5 percentage points, reflecting more favorable outlooks for Georgia, Kyrgyzstan, Tajikistan and Uzbekistan. Strong investment, remittances, and financial and capital inflows are expected to help these economies offset the adverse effects of regional conflicts.
Among oil exporters, Kazakhstan’s economy is forecast to grow by 4.4% in 2026, Turkmenistan’s by 2.4% and Azerbaijan’s by 1.7%. The IMF has slightly reduced its projections for all three countries since April, citing supply problems expected to constrain oil-sector activity. A less accommodative fiscal stance is an additional factor for Azerbaijan.
The IMF expects Azerbaijan’s external position to improve in 2026 more quickly than projected in April, supported by higher oil revenues. The Fund forecasts an average crude oil price of about $96 a barrel in 2026 and about $87 in 2027. Its April forecasts were $82.20 and $76, respectively.
Higher energy prices could boost export revenues and the external balance. However, supply constraints in the oil sector are limiting Azerbaijan’s real GDP growth. The IMF expects fiscal consolidation to continue in the country in 2026 and beyond, with economic growth reaching 2.5% by 2031.
Economic contraction forecast for Gulf countries
The outlook for the Caucasus and Central Asia differs from that of some Gulf economies directly affected by the Middle East conflict. The IMF forecasts a 4.8% contraction in the economies of Gulf Cooperation Council countries in 2026, following growth of 4.5% in 2025.
Kuwait’s economy is expected to contract by 16.7%, Qatar’s by 15.6% and Bahrain’s by 11.3%. The IMF projects declines of 3.3% in Saudi Arabia and 3.9% in the United Arab Emirates, while Oman is forecast to grow by 4.1%. The Fund attributes the downturn to disruptions in hydrocarbon production and exports, as well as weaker trade, logistics and business confidence.
Middle East recovery hinges on easing of conflict
For the Middle East, North Africa, Afghanistan and Pakistan, the IMF forecasts a 1.3% contraction in 2026, followed by growth of 6.6% in 2027. It says recovery will depend on the gradual normalization of energy production and trade.
The Fund’s baseline scenario assumes disruptions will continue until the first quarter of 2027, after which flows through the Strait of Hormuz will gradually recover. However, the IMF warns that a resumption of military operations or further disruptions to energy routes could prolong economic losses and drive up energy prices.
Despite the projected growth, cumulative economic output in countries directly affected by the conflict is expected to remain below pre-conflict projections over 2026–2030.
