Fitch Ratings doesn't expect Azerbaijan to switch to flexible exchange rate

Fitch Ratings has not detected any indication that the Azerbaijani authorities are ready to transition to a floating exchange rate regime, Arvind Ramakrishnan, EMEA Sovereign Ratings director at Fitch Ratings, told Report.

"There is a strong official commitment to maintaining the national currency's peg to the US dollar, and we expect this exchange rate to remain unchanged," Ramakrishnan noted.

He clarified that Fitch has left its real GDP growth forecast unchanged at 2.4% in 2026 and 2027, which is in line with the country's estimated medium-term economic growth potential.

According to Fitch's forecasts, average annual inflation will reach 4.6% in 2026 and subsequently decline to 4% in 2027.

"We assume that budget policy in 2026-2027 will be moderately stimulative, driven by spending in the liberated territories of Azerbaijan and other capital investments. However, we cannot rule out a partial underspending of the defense budget due to the 'peace dividend' resulting from the normalization of relations with Armenia. The structure of planned investments will likely not lead to a significant increase in domestic inflationary pressure," he added.