Monthly Economic Review: February, 2026

Chronology of Events March 30 • President Ilham Aliyev signed a decree on social support for the families of deminers who died during demining operations. • Against the backdrop of escalation in the Middle East, oil prices increased: Brent reached approximately 111 dollars per barrel, while Azeri Light exceeded 120 dollars. • Imports of pharmaceutical products amounted to 88 million dollars, decreasing by 2.9 percent, with a slight increase in exports. March 31 • Amendments to the law “On Patents” came into force, aimed at developing the innovation environment. • New tariffs for forensic examinations (200–2000 manats) were introduced, raising concerns about the affordability of these services. • The digitalization of real estate purchase and sale procedures and notarial services was approved. • The rules for disclosure of company ownership structures were changed, reflecting institutional shifts in corporate governance. • A director of the Agency for Monitoring State Enterprises was appointed. April 1 • SOCAR signed an agreement with Egypt’s EGPC on cooperation in the energy sector. • The President approved measures for the development of the mining and metallurgical industry, including the expansion of processing and exports. • The price of Azeri Light oil reached a new high for 2026 (exceeding 132 dollars per barrel). • A significant increase in transit air traffic through Azerbaijan was recorded, strengthening the country’s role as a transport hub. April 2 • A meeting of the Organization of Turkic States was held in Baku, focusing on investments, trade, and transport corridors. • The monetary base increased by 4.2 percent and reached 23.7 billion manats. • Stability in the foreign exchange market was maintained, accompanied by a decrease in dollarization and an increase in reserves. • The Central Bank indicated a possible upward revision of the inflation forecast. April 3 • Financial violations in the State Agency of Automobile Roads were reported, with total damage estimated at approximately 1 billion manats. • The price of Azeri Light oil rose to 141.68 dollars per barrel, approaching historical highs. • The introduction of a toll section on the Ahmadbeyli–Fuzuli–Shusha road was approved. April 4 • Azerbaijan sent a third batch of humanitarian aid to Iran (approximately 200 tons), accompanied by increased logistics activity. April 6 • Heavy rains fell across Baku, the Absheron Peninsula, and several regions of the country from April 4–6, with around 90 mm of precipitation recorded (up to 390% of the monthly norm). This led to flooding of residential areas and infrastructure, exposing vulnerabilities in the urban drainage system. • Azerbaijan Airlines (AZAL) signed a codeshare agreement with Air Serbia. Starting in May, Baku–Belgrade flights will operate twice a week, reflecting expanded transport connectivity. April 7 • Execution of the state budget for the first quarter showed a surplus of approximately 1.78 billion manats: revenues reached 9.6 billion manats (+5% above forecast), while expenditures totaled 7.8 billion manats (97.6% of the plan). At the same time, the consolidated budget recorded a deficit, indicating persistent imbalances at the broader public sector level. • The Organization of Turkic States estimated the combined GDP of its member countries at over $2.1 trillion, with mutual trade of about $57 billion, highlighting the potential for regional economic integration. • A roadmap to improve the business environment (Business Ready initiative) was approved, предусматривающая simplifying company registration and digitalizing notarial services. • Hungary allocated a $30 million grant for reconstruction in the liberated territories (Soltanly village), strengthening the investment component of recovery efforts. • The World Bank raised Azerbaijan’s GDP growth forecast to 2% for 2026. April 8 • The mortgage market contracted sharply: only 353 loans were issued totaling 29.9 million manats, reflecting limited financing and rising housing prices. • President Ilham Aliyev approved reforms in subsoil use, land relations, and natural resource management, strengthening centralization and environmental regulation. • The powers of the Ministry of Ecology were expanded, including oversight of land use and resource extraction. April 9 • The Asian Development Bank confirmed a GDP growth forecast of 2% for 2026, with an expected budget deficit of about 2.2% of GDP. • Additional oil revenues amid the crisis around Iran were estimated at $360–540 million; however, their impact on the overall fiscal trajectory remains limited. • The president approved amendments to military service legislation, including reducing the term of service for women from three years to six months. April 10 • The tax service published a list of the 100 largest taxpayers, confirming the continued dominance of the oil and gas sector in the economy. • The Asian Development Bank pointed to a slowdown in economic growth in the medium term due to declining oil production and moderate performance in industry and agriculture. April 13, 2026 • Speaking at parliamentary committee hearings on April 13, Chairman of the Chamber of Accounts Vugar Gulmammadov stated that audits conducted in 2025 revealed violations, financial distortions, and inefficient spending totaling 1.55 billion manats, which is lower than approximately 2.07 billion manats recorded a year earlier. • In January–March 2026, Azerbaijan produced 6.6 million tons of oil (49 million barrels) and 12.6 billion cubic meters of natural gas, according to the Ministry of Energy. • According to the State Tax Service, the number of registered taxpayers in Azerbaijan increased by 5.1 percent year-on-year as of April 1, reaching 1,696,283, with individuals continuing to make up the majority of the tax base. • In January–March 2026, retail trade turnover in Azerbaijan amounted to 15 billion 927.3 million manats, including 8 billion 774.9 million manats in food products, beverages, and tobacco, and 7 billion 152.4 million manats in non-food goods. • Oil production in Azerbaijan declined by more than 300 thousand tons in the first quarter, equivalent to approximately 25 thousand barrels per day. At the current pace, annual decline may reach around 1.2 million tons. • The banking sector increased net profit by 5.7 percent to 189.7 million manats in January–February 2026, driven by an expansion in interest margins, while lending growth to the economy slowed significantly. • External public debt decreased by nearly 8 percent to 4.69 billion United States dollars as of April 1, 2026, declining by 7.5 percent year-on-year. At the same time, the country’s strategic foreign exchange reserves increased by 15.9 percent to 85.15 billion United States dollars. April 14, 2026 • According to the Central Bank’s latest financial stability report, household debt reached 18.4 percent of disposable income in 2025, increasing by 0.4 percentage points compared to the end of the previous year. This growth occurred despite nominal income increases of approximately 8 to 10 percent, largely driven by hydrocarbon revenues and budget inflows. • President Ilham Aliyev signed a decree approving amendments to the laws “On Road Traffic” and “On Automobile Roads,” aimed at clarifying regulations on vehicle evacuation, storage tariffs, and expanding the powers of state authorities. • The government approved a standardized framework program regulating the use of water resources for special purposes, formalizing relations between the state and private users amid growing pressure on national water resources. The decision establishes a unified model agreement for access to water resources. • According to the State Statistics Committee, Azerbaijan’s economy contracted by 0.3 percent year-on-year in January–March to 29.7 billion manats, indicating signs of a technical recession driven by weak non-oil sector performance. • Additional amendments introduced a new procedure for returning impounded vehicles, allowing their release immediately after payment of the required fee. April 15, 2026 • Azerbaijan exported approximately 6.6 to 6.8 billion cubic meters of natural gas in the first quarter of 2026, maintaining stable supply flows to Europe, Turkey, and Georgia, while structural constraints continued to limit further production expansion. • In January–February 2026, Azerbaijan received 337,300 foreign visitors from 163 countries, representing a decrease of 0.4 percent compared to the same period of the previous year. April 16, 2026 • The State Oil Company of Azerbaijan and TotalEnergies discussed the next phase of development of the Absheron gas condensate field. The project is considered important for stabilizing gas production but is unlikely to significantly increase export volumes. • Exports of crude oil and petroleum products declined sharply in both volume and value in the first quarter of 2026. Azerbaijan exported 5.08 million tons, a decrease of 15.5 percent year-on-year, while total export value fell by 25.1 percent to 2.5 billion United States dollars. • Investment in residential construction declined by 26.6 percent to 510.4 million manats compared to 683 million manats a year earlier. April 17, 2026 • The Cabinet of Ministers approved amendments to regulations governing the preparation and execution of the state budget, including provisions related to road infrastructure financing and vehicle recycling, as part of efforts to improve public financial management. • New rules were adopted for the placement of buildings and structures within airport and airfield safety zones, strengthening control over construction activities near aviation infrastructure. • Minister of Energy Parviz Shahbazov stated that energy cooperation between Baku and Ankara represents a model of long-term partnership, highlighting projects such as Baku–Tbilisi–Ceyhan, Baku–Tbilisi–Erzurum, and the Southern Gas Corridor, which currently delivers more than 16 billion cubic meters of gas annually and has the potential to double in capacity. However, insufficient investment, partly linked to the European Union’s green transition policies, continues to constrain expansion. • Electricity production in January–March declined by 2.5 percent to 6 billion 991 million kilowatt-hours, with 86.7 percent generated by thermal power plants. • Imports of vehicles fell sharply in the first quarter of 2026. The number of imported vehicles declined by 33 percent, while their total value decreased by 15 percent. The decline was largely driven by the removal of tax incentives for electric and hybrid vehicles. Passenger car imports fell by 36.2 percent, while imports of electric vehicles decreased by 30.1 percent and hybrid vehicles by 35.6 percent. The only segment showing growth was bus imports, which increased significantly both in quantity and value. • The Cabinet of Ministers also approved new rules regulating state control measures for goods that do not comply with technical regulations, strengthening oversight of consumer markets and aligning safety standards with international practices. April 20, 2026 • Energy Minister Parviz Shahbazov announced plans to incorporate nuclear energy into Azerbaijan’s long-term energy mix, reflecting efforts to diversify the energy system and achieve decarbonization goals. • Inflows of remittances from abroad showed moderate growth. According to the Central Bank, transfers amounted to $1.177 billion in 2025, increasing by 8.7% compared to 2024. • President Ilham Aliyev signed a decree transferring the operating rights of several non-metallic mineral deposits to the state-owned company AzerGold CJSC, strengthening centralized control over the resource sector. • The Central Bank revoked the license of insurance company AtaSığorta, indicating tighter supervisory policy in the financial sector. April 21, 2026 • The Cabinet of Ministers expanded the functionality of the “Electronic Notary” system by increasing the list of documents available for digital processing as part of e-government development. • The Baku Metro temporarily suspended operations due to a technical malfunction between the “Ulduz” and “Nariman Narimanov” stations; however, full service was restored later the same day. • European Tobacco-Baku announced the start of liquidation procedures, reflecting ongoing restructuring in certain industrial segments. April 22, 2026 • The government tightened financial monitoring rules for transactions related to gambling, increasing oversight of operations exceeding 3000 manats as part of anti-money laundering measures. • Azerbaijan and Spain agreed on a Roadmap for Economic Cooperation aimed at expanding trade and investment ties. • The Ministry of Finance reported that public debt stood at 24.46 billion manats (18.7% of GDP) as of April 1, declining by 8.1% year-on-year. External debt amounted to $4.69 billion (6.1% of GDP), while domestic debt reached 16.49 billion manats (12.6% of GDP). • The Chamber of Accounts identified large-scale irregularities in the agricultural subsidy system for the period 2022–2025, affecting key government institutions in the sector. • Private architect Elchin Aliyev reported tax authority demands for advance payments, triggering public discussion on tax practices. April 23, 2026 • The State Oil Fund of Azerbaijan (SOFAZ) reported stable asset performance despite volatility in global markets. • At the same time, the fund recorded a deficit of 2.2 billion manats, the highest level in the past 7–8 years. • The Ministry of Justice reported more than 402,000 enforcement proceedings related to non-performing loans, indicating persistent risks in the banking sector. • A representative of SOCAR Trading highlighted the need to establish a commodity exchange in Baku to hedge risks and develop energy trading, potentially strengthening the country’s role as a regional energy hub. April 24, 2026 • Azerbaijan joined the UN Singapore Convention on Mediation, which could enhance the country’s attractiveness for foreign investors and simplify the resolution of commercial disputes. • President Ilham Aliyev ordered the expansion of the Alat Free Economic Zone by 1,453.09 hectares, reinforcing the country’s logistics and industrial capacity. • A decree was also signed to provide one-time financial assistance to World War II veterans: — 2750 manats for war participants; — 1500 manats for other eligible categories. • These measures are aimed at supporting social policy and strengthening domestic stability. April 27, 2026 • Audits of financial management in reconstruction projects in the liberated territories, conducted in 2025, identified certain shortcomings in the use of budget funds. However, their scale is not considered significant, said Chairman of the Chamber of Accounts Vugar Gulmammadov. April 28, 2026 • Azerbaijan sharply reduced excise duties on imported fuel in order to stabilise domestic supply, indicating structural imbalances in the oil refining sector. • President Ilham Aliyev signed an order on additional measures to mitigate the consequences of flooding caused by heavy rains in March–April. • Prime Minister Ali Asadov approved the regulatory and legal framework for the creation of the “Unified Electronic Archive” information system aimed at digitising state documents. • The government removed “ASG Biznes Aviasiyası” and “ASG Helikopter Xidmətləri” from the list of natural monopolies, opening the aviation services sector to competition. • The Cabinet of Ministers also amended the rules on the exchange of financial information on non-residents in order to enhance tax transparency. • According to the State Statistics Committee, in January–March 2026, expenditures on the reconstruction of the liberated territories decreased by more than half, falling to 386.2 million manats from 812.3 million manats a year earlier. April 29, 2026 • President Ilham Aliyev signed amendments to the Labour Code and the Law “On Education” aimed at unifying the legal status of teaching staff. • Azerbaijan approved an agreement to establish a regional acceleration centre in partnership with the International Telecommunication Union to support the startup ecosystem and accelerate digital transformation. • Amendments to the Law “On Culture” were adopted, introducing grant financing for cultural projects. • According to the Ministry of Finance, Azerbaijan’s total public debt amounted to 24 billion 464 million manats at the end of the first quarter of 2026. April 30, 2026 • Azerbaijan launched an online registration system for prison visits, expanding digital services within the penitentiary system. • The State Oil Company of Azerbaijan reported stable production and export performance in the first quarter of 2026, with an increased emphasis on the role of natural gas. • “Sea Breeze Construction” won a tender for construction works in the Gubadli district; the contract value exceeds 34.4 million manats. May 1, 2026 • President Ilham Aliyev approved rules for the implementation of regulatory pilot projects aimed at testing digital solutions in public administration. Experts view this as a methodological shift toward data-driven governance. May 2, 2026 • The Cabinet of Ministers introduced amendments to the commodity nomenclature of foreign economic activity and the system of customs duties. • The decision предусматривает exemption from customs duties until 2030 for imports of palm and coconut oils, their fractions, and derivatives. This measure is intended to support the processing industry but also reflects the dependence of certain sectors on low-cost raw materials. Summary In April, Azerbaijan’s economy was shaped by the intersection of three key factors: the gradual slowdown of the commodity sector, the strengthening of the state’s institutional role, and adaptation to mounting internal constraints. The overall dynamic points to a transition from a growth model based on external revenues to a more managed but less flexible system, where stability is ensured through administrative and financial instruments. The economic trajectory became more restrained. According to the results of the first quarter, gross domestic product declined by approximately 0.3 percent, reflecting pressure on the oil sector. At the same time, the non-oil economy continued to demonstrate moderate growth, although its pace remained insufficient to offset the decline in hydrocarbon production. This once again highlighted the country’s structural dependence on energy exports. ________________________________________ Energy Sector and External Environment April confirmed mixed dynamics in the energy sector. On the one hand, stable gas exports supported foreign trade positions and ensured foreign currency inflows. On the other hand, declining oil production and limited investment in new projects constrained expansion potential. Discussions on the possible inclusion of nuclear energy in the long-term balance signaled a strategic shift. This step reflects an attempt to diversify the energy system amid growing domestic demand and global pressure toward decarbonization. At the same time, initiatives to establish a commodity exchange indicate an effort to institutionalize Azerbaijan’s role as a regional energy hub and reduce sensitivity to price volatility. ________________________________________ Fiscal Policy and Resource Reallocation Fiscal policy during the month showed signs of adjustment. A more than twofold reduction in spending on the reconstruction of the liberated territories indicates a shift from large-scale financing to a more selective allocation of budgetary resources. At the same time, strong fiscal discipline remains in place: the level of public debt remains relatively low, and accumulated reserves continue to serve as a buffer. However, deficits in certain state funds and the need to reallocate expenditures point to a gradual tightening of budgetary conditions. Audits of projects revealed certain irregularities in the use of funds, highlighting ongoing issues with the efficiency of public spending. ________________________________________ Strengthening of Regulation and Institutional Transformation April became a period of noticeable strengthening of state control. The transfer of a number of non-metallic mineral deposits under the management of a state-owned company and the tightening of financial monitoring reflect a course toward the centralization of strategic assets. At the same time, selective liberalization was observed. The removal of certain companies from the list of natural monopolies, particularly in the aviation sector, demonstrates an attempt to create a more competitive environment where risks are considered limited. Changes in customs and tariff policy, including the exemption of certain types of imports from duties, are aimed at supporting the processing industry but simultaneously reinforce dependence on external supplies. ________________________________________ Digitalization and Governance Modernization Digital transformation became one of the central directions of the month. The launch of the “Unified Electronic Archive,” the expansion of the electronic notary system, and the introduction of regulatory pilot project mechanisms indicate a transition toward a more flexible governance model. This involves the gradual implementation of data-driven governance principles, where decisions are tested before large-scale application. This reduces institutional risks but requires a high level of coordination and technological infrastructure. ________________________________________ Macroeconomic Stability and Hidden Risks The financial system remained stable. Strategic foreign exchange reserves stayed at a high level, exceeding 80 billion United States dollars, while external public debt continued to decline. The banking sector demonstrated profitability; however, the slowdown in lending and the decline in mortgage activity point to cooling domestic demand. An additional risk factor is the rising debt burden of households. A significant indicator of strain remains the volume of non-performing loans, which continues to exert pressure on the financial system. ________________________________________ Trade, Logistics, and External Diversification April confirmed a strategic focus on the development of a transit economy. Expanded cooperation with European countries and the development of the Alat Free Economic Zone strengthen Azerbaijan’s role as a logistics hub. The restoration and development of southern trade routes, including the direction through Iran, retain strategic importance. At the same time, there is a continued gradual reorientation of trade flows beyond traditional markets. ________________________________________ Social Policy and Internal Stability Social measures, including payments to certain categories of the population, continued to serve the function of maintaining internal stability. Although their direct economic impact is limited, they play an important role in sustaining social balance. ________________________________________ Structural Constraints and Risk Factors Despite overall stability, structural constraints are becoming more pronounced: • dependence on the oil and gas sector remains dominant; • investment in technology and research remains below the required level; • small and medium-sized enterprises continue to occupy a limited share of the economy; • infrastructure vulnerabilities, including the impact of heavy rainfall, expose weaknesses in resource management systems; • dependence on imported raw materials in certain sectors persists. ________________________________________ Overall Assessment April 2026 demonstrated a transition toward a model of managed adaptation. Azerbaijan’s economy maintains macrofinancial stability due to accumulated reserves and strict fiscal policy; however, growth is becoming more restrained and increasingly dependent on internal factors. The key feature of the period is the combination of strengthened state control, digital modernization, and attempts at diversification amid continued dependence on hydrocarbons. Short-term stability is ensured through administrative and financial resources, while the long-term outlook continues to depend on the ability to transform oil and gas revenues into sustainable growth. Thus, April reflects an economy in transition: stable in form but constrained in structure, where further development will depend on the depth and effectiveness of the reforms being implemented.

The week began with steps related to the development of the country’s municipal infrastructure and local industrial production.