10:42 - 12.09.2025

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September 12, Fineko/abc.az. ING Group has issued forecasts for the economies of the South Caucasus, focusing mainly on Azerbaijan and Armenia.

According to ABC.AZ, citing Report, Azerbaijan’s budget remains in surplus at 2.6% of GDP, and retail lending continues to be high. The central bank lowered its key rate to 7% in July and maintained it in September. The manat remains stably pegged at 1.7 per US dollar, and this peg is expected to continue throughout 2025.

A positive development was Moody’s upgrade of Azerbaijan’s credit rating to investment grade in July, based on growing reserves and the normalization of relations with Armenia. At the same time, analysts point to a decline in the trade surplus — $1.8 billion versus $5.5 billion in 2024 — amid fluctuations in oil prices, which remains a key risk.

For Armenia, ING emphasizes that the peace process remains crucial. After strong growth in 2023–2024, the country’s economy is gradually slowing: in the first half of 2025, GDP increased by 5.6% year-on-year. However, the widening fiscal deficit to 4% of GDP and the growth of the trade deficit (around 15% of GDP) highlight the economy’s vulnerability, the report notes.

“The central bank has held the key rate at 6.75% since February, as inflation exceeds the 3% target despite a strong dram. In addition, remittances have fallen below 5% of GDP, which also affects economic resilience,” ING said.