BAKU, Azerbaijan, December 3. The Central Bank of Azerbaijan’s (CBA) latest forecast shows that the annual inflation rate is expected to remain within the target range of 4±2 percent for both 2024 and 2025, Trend reports.
The CBA's October forecast for inflation in 2024 is set at 5.1 percent.
"The nominal effective rate [NEM] is expected to contribute a decrease of 1.24 percentage points, while other factors will contribute a reduction of 1.72 percentage points. The October forecast has been revised down by 0.3 percentage points compared to the July forecast, primarily due to lower inflation projections from trade partners.
By the end of 2024, inflation in trading partner countries is expected to be 9.8 percent [down from 10.3 percent in the July forecast], which will impact Azerbaijan's inflation forecast by a reduction of 0.2 percentage points.
For 2025, the inflation forecast has been set at 5.8 percent. The projected annual inflation will be influenced by several factors, including government consumption [adding 0.41 percentage points], household consumption [1.61 percentage points], agricultural product prices [3.33 percentage points], and inflation in trading partners [2.42 percentage points]. The NEM is expected to have a reducing effect of 2.13 percentage points.
The October forecast for 2025 has been revised upwards by 0.3 percentage points compared to the July forecast. It is expected that by the end of 2025, the NEM will strengthen by 7.9 percent [compared to 8.7 percent in the July forecast], which will contribute an additional 0.22 percentage points to the inflation forecast.
The realization of these inflation forecasts will depend on a range of external and internal factors. Key factors include the nominal effective exchange rate of the manat, inflationary processes in partner countries, and the prices and tariffs for products and services regulated by the government. Additionally, climate change and rising production costs may influence inflation through the agricultural producer price index. Internal factors, such as the dynamics of aggregate demand, may also play a role.
Inflation expectations across different sectors have varied. A monitoring of the real sector showed that the services sector had the highest price increase expectations. However, expectations for construction and trade remained negative for the last two months. In the non-oil industrial sector, there was volatility throughout the year, with expectations shifting from negative to positive.
In the industrial sector, the price index in September was 0.07 [compared to 3.88 for the same period last year]; in trade it was 14.28 [compared to 2.35]; in construction it was 0.29 [compared to 5.40]; and in the services sector it was 21.59 [compared to 22.79 for the same period last year]," the report said.