Global
The Asian Development Bank has revised its 2026 outlook for the South Caucasus, widening the gap between a slowing Azerbaijan and faster-growing Georgia and Armenia.
The numbers
- Azerbaijan: 2026 growth cut to 1.6% from 2.0% in the July forecast; about 1.8% projected for 2027.
- Georgia: raised to 6.3% from 5.5%; 2026 inflation forecast lifted to 5.2%.
- Armenia: unchanged at 5.0% for 2026, rising to 5.5% in 2027.
The ADB links Azerbaijan's downgrade explicitly to a contraction in the oil sector. For the wider Caucasus and Central and West Asia subregion, growth is now seen at 3.7% in 2026 (from 3.8%) and 4.1% in 2027 (from 4.2%). Subregional inflation is forecast at 23.1% in 2026, up from 22.0%, and 17.6% in 2027, up from 16.3%.
Why Azerbaijan is lagging
Analysis published by JAMnews points to the structural drag. Azerbaijan's GDP contracted 0.3% year on year in the first quarter of 2026 to AZN 29.7 billion, with oil and gas value added down 1.2% and the non-oil economy growing only 0.2%. Construction fell 19.8% in real terms, while information and communications grew 9.2% from a small base of 2.0% of GDP.
Crude output has fallen from 50.8 million tonnes in 2010 to 27.7 million tonnes in 2025, and output from the ACG block alone has dropped from 40.5 to 16.2 million tonnes. Energy products made up around 87% of total exports in 2024, leaving the budget exposed to price and volume swings.
Neighbours pull ahead
Georgia's economy expanded 8.8% in February and averaged 8.4% over January-February, and the National Bank of Georgia has cited 9.1% growth in the first quarter. Armenia's economic activity index stood at 107.4 in January-February, a 7.4% annual gain. Both outperformed Azerbaijan by a wide margin.
What to watch
For investors, the divergence strengthens the case for non-oil diversification in Baku and underlines Georgia's momentum despite elevated inflation. The next ADB update will show whether the Azerbaijani oil drag deepens or stabilises.
Sources: ADB outlook as reported by Caspian Post (September 28, 2026); JAMnews.
